2021 Bitcoin's Flash Crash
Despite being praised for its use of blockchain technology, a technology that offers the integrity of information (Sarker et al., 2021), Bitcoin (BTC) is still prone to error and faulty. Due to an algorithm bug in one of Binance’s institutional traders, Bitcoin fell 87% in a flash on the Binance U.S. exchange (Baker, 2021). This incident is similar to what happened a month earlier in September 2021, where faulty data provided by Pyth Network partners caused Bitcoin to fall to USD 5.402 on the network (Baker, 2021).
According to CNBC, this is happened due to a messed up order created or when the wrong order size or price is entered (CNBCTV18.com, 2021). If this event happened when the trade is colossal, it’ll overwhelm the exchange and end in a decline. This is known as a flash crash. Although this happened to one exchange, it is also said that the effect is also being experienced by other exchanges and even another coin like Ethereum, whose price dropped by 50%.
Some reported that people were experiencing losses due to this incident, but there are also benefitted from this incident. People with an automated trading set are affected the most - automatically buy or sell at a certain price. Those who set an exit strategy lost some or all of their BTC assets. But those with an enter strategy bought BTC at a lower price and benefitted in an instant since this crash was fixed not long after.
References
- Sarker, S., Henningsson, S., Jensen, T. and Hedman, J., 2021. The Use Of Blockchain As A Resource For Combating Corruption In Global Shipping: An Interpretive Case Study. Journal of Management Information Systems, [online] 38(2), pp.338-373. Available at: https://www.tandfonline.com/doi/full/10.1080/07421222.2021.1912919 [Accessed 29 November 2021].
- Baker, N., 2021. Bitcoin’s 90% Crash on Pyth Was Due to Computers Botching Basic Math. Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2021-09-22/bitcoin-s-90-pyth-crash-due-to-computers-botching-basic-math [Accessed November 29, 2021].
- CNBCTV18.com (2021). Bitcoin’s 90% flash crash on Binance US, explained. [online] cnbctv18.com. Available at: https://www.cnbctv18.com/cryptocurrency/bitcoins-90-flash-crash-on-binance-us-explained-11191952.htm [Accessed 29 Nov. 2021].
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