Bitcoin Caused Crypto Chaos After a Massive Flash Crash
After Bitcoin (BTC) boosted higher, it has suffered a flash crash. It lost about $1,500 from its price within a few minutes.
The price of BTC surpassed $12,000 per Bitcoin on the Luxembourg-based Bitstamp exchange early Sunday morning. After that, it declined 12% to $10,500 within the hour.
Currently, the BTC price bounced back, and somehow pulled the broader cryptocurrency market with it. It recently traded at approximately $11,300, but not before over $1 billion of Bitcoin and Crypto positions were liquidated across different exchanges.
Bybt, Bitcoin and Crypto market data providers tweeted, “In the past 24 hours, 72,422 people were liquidated.”
Also, it added that the largest single liquidation order – worth about $10 million – happened on the Seychelles-based exchange BitMEX, recognized for its high leverages trading volume.
Leveraged trading enables traders to get larger positions with smaller amounts of capital. And this is with the number of Bitcoin and cryptocurrency exchanges offering high leveraged trading explosions during the recent years.
In addition to that, traders take positions, effectively bets, where they expect prices to be when their position closes. Here, they lose their capital if the market goes against them.
The recent price rally has attracted an increase of retail traders to the crypto market. And this is with a lot of Bitcoin exchanges showing year-to-date trading highs as eager investors tried to catch the upswing.
The reason for the sudden Bitcoin flash crash was not immediately apparent. However, some speculated that it was due to so-called ‘whales’ who control massive amounts of BTC and other cryptocurrencies moving the market. Whales could quickly push the markets when trading volumes are lower like early Sunday morning.
The Sudden Crash
The surprise move in the Bitcoin price caused more than $20 billion worth of value to be wiped out from the combined market capitalization of the world’s cryptocurrencies based on CoinMarketCap data. And this has watched with the combination of shock and awe by the BTC and crypto community.
Anthony Pompliano, Bitcoin and crypto investor, tweeted, “Bitcoin is the most ruthless asset in the world.”
The recent rally of Bitcoin breaks its near three-month trading malaise. And it has attributed global investors seeking low risk so-called safe-haven assets like gold – which arrive within striking distance of hitting $2,000 for the first time this week.
Digital Currencies
Meanwhile, the former Vice President of China’s central bank, Wang Yongli, pushed for central bank digital currencies placing it as a substitute for cash in circulation.
Yongli explained that digital currencies could be a substitute for cash, but they must not confine with that.
Also, Wang stated that digital currencies can reshape monetary structures. And these can involve setting up basic accounts for every social entity on a central bank’s digital currency platform. This lets the bank supervise digital currencies without a massive impact on the current financial system.
Then, he said that a digital currency could enhance monetary policy effectiveness because it can avoid the excessive issuance of physical paper money.
