A 5,000 BTC dump on Bitstamp most likely caused the flash crash in the price of bitcoin that occurred very early on Friday May 17th, 2019. Bitcoin plunged to $6,100 on the exchange but has since recovered over $7,000 over the past week.
A trader on the Bitstamp exchange was said to have put up a sell order of 5,000 BTC at a strange low price of $6,200. This led to a massive price plunge on the exchange, setting up a temporary arbitrage opportunity.
Soon, the effect spread across the market to other exchanges with the BTC market average dropping to about $7,100. As at press time, Bitcoin had rallied to $7,300 on most of the well-known Bitcoin exchange platforms.
Bitcoin News – Which of these: A whale dump, fat finger error, or a bot glitch?
Currently, we are yet to know more, but three likely theories would probably give us an explanation to what really happened: a whale dump, fat finger error, or a bot glitch. However, given that there was no significant volume variance at the time the crash happened, then it is very unlikely that the crash was caused due to a deliberate dump.
On the flip side, taking a look at the Bitstamp chart, the dump took place in just ten to twelve minutes with the orders being continuously executing at consecutively lower levels compared to the market price.
BitMEX says that such a pattern reeks of manipulation but the tradeoff seems counterproductive unless they held high leverage short bets on another exchange. In theory, the dump would lead to a massive liquidation of long positions thus making the trader earn some profits.
Once again, these are just speculative explanations, but TheOofy will keep monitoring the situation to give updates as they come in.
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