What could be happening to Bitcoin? BTC plunged more than $1,700 on Friday
On May 17, 2019, at about 10:30 UTC, Bitcoin (BTC) saw one of the greatest declines in prices ever in history. BTC nosedived by about $1,702. This is the largest drop since January 2018.
The price of BTC dropped from $7,880 to $6,178 causing some crypto exchanges like BitMEX to liquidate orders. BitMEX is reported to have liquidated about $250 million worth of BTC orders.
The drop was so abrupt and it caused jitters among Bitcoin investors especially after such a good month where the digital currency has seen a huge rise in price. Everything took place within 15 minutes!
However, immediately after the drop, the market prices later shot up to go to $7,300 from where they have tried to maintain above $7,000.
What caused the sudden drop?
The drop is being linked to a large sell of BTC that took place in Bitstamp, where 5,000 BTC were converted to USD by a single user. The large sell is said to have greatly impacted the order books.
The main question remains: what caused the large sell? Why did the user have to sell such amount of BTC at once? Was it a hack? Was it a mistake? Or did the seller just want out on Bitcoin after holding his/her investment for quite a while waiting for the prices to rise as they have over the past month?
Bitstamp has said that it has launched investigations into the issue.
But how can a sell of BTC in one crypto exchange affect the prices across all crypto exchanges
As we all know, Bitcoin, just like all other cryptocurrencies, is decentralized and its prices depend on the users. And this could just be the perfect example of how these users control the prices!
According to the chronology of the events, the large sell triggered confusion in Bitstamp exchange which sent the prices down by over $1,700 maybe in an attempt to balance the order books.
The drop was so abrupt and exchanges like BitMEX had to liquidate most of the long BTC orders to protect its users. BitMEX crypto Exchange was the first to be affected since it calculates its BTC price from the average Bitstamp and Coinbase Pro Bitcoin prices.
As the liquidation of the orders on BitMEX was being executed, the drop in prices spread out to all other crypto exchanges.