Bitcoin (BTC) experienced a flash crash yesterday with the price plummeting from $29,800 to just $27,243 in just 60 minutes. The reasons for this violent price movement, which has not been seen on the Bitcoin chart for a long time, have led to speculation about the cause of the crash.
The popular Twitter account db (@tier10k) and crypto market research firm Arkham Intelligence are in the crosshairs of the speculation. But what happened?
Bad Data Responsible for Bitcoin Flash Crash?
The crash was reportedly the result of a purse move by the US government and the sell-off of Mt. Gox Bitcoins. The Twitter account db sent an automated tweet at 4:08 PM EST (8:08 PM UTC) stating: “[DB] Mt Gox and US Govt Wallets Making Transactions”, which turned out to be false.
[DB] Mt Gox and US Govt Wallets Transacting: Arkham Alert
— db (@tier10k) April 26, 2023
Arkham Intelligence denies sending false messages to certain users. But @tier10k also denied making a mistake: “[DB] Arkham: A bug fix deployed today caused alerts to be incorrectly sent to a small subgroup of users,” the account wrote as justification, explaining in a follow-up tweet:
Had to wait for clarification from Arkham, didn’t want to point the wrong finger. Believe they will make a statement soon. Will use multiple on-chain providers in the future.
For his part, Arkham executed investigated a DB Alert situation and determined that Arkham alerts “were sent correctly in this case”. The platform claims that DB has set up two alerts on all Bitcoin transactions worth more than $10,000 and those alerts “Mt Gox” and “US Gov.”
Thus, Arkham’s account of the events suggests that DB deduced the transactions of specific Bitcoin addresses from the designations he assigned himself.
“When we fixed a bug that prevented us from sending alerts for configurations like this, it correctly received many alerts based on its parameters. No one was getting inaccurate alerts, they just started getting the alerts they set up earlier,” says Arkham.
Remarkably, Arkham also clarifies that db’s tweets did not cause Bitcoin’s flash crash. According to Arkham’s research, the crash began before db’s tweet, “as the drop occurred between 19:17 and 20:01 UTC (15:17 and 16:01 EST), and the warnings and tweet were sent after at 20:20: 07 UTC. and 20:08 UTC (16:08 UTC) respectively.”
Cascade of liquidations
The bottom line is that the Bitcoin price plummeted more than 8%, but as the data shows, this was happening even before db’s tweet. In the process, more than $1 billion in outstanding interest (leverage) was wiped out. According to Coinglass factsA total of $80.3 million in longs and $73.4 million in shorts was liquidated in BTC yesterday.
As analyst @52skew goes on to point out, sales volume on the major exchanges was huge. Binance saw sales volume of 19,400 BTC, Coinbase of 5,000 BTC, Bitstamp of 1,400 BTC and OKX of 6,400 BTC. He shared chart below to explain what happened.
At the time of writing, Bitcoin’s price has already recovered from the sharp drop. BTC has already erased most of its losses, trading at USD 29,189.
Featured image from iStock, chart from TradingView.com
