Bitcoin has endured a catastrophic day’s trading that has seen its value halved in 24 hours, sending the price crashing to the $3,800 region and causing massive liquidations on a number of platforms. The historic day, which produced the biggest daily selling volume since January 2015, thrusts the Bitcoin market further into unchartered territory, and calls into question the short-term health of the entire ecosystem.
Bitcoin’s Three-hour Flash Crash
Bitcoin had already experienced a huge drop from $8,000 to $5,550 early Thursday which had rocked the market, but barely twelve hours later a second seismic shift dropped it down to a barely conceivable $3,850. On its own this is a staggering hit, but it is made especially worse considering Bitcoin was sitting at $10,500 a month ago:
The extraordinary price action, which represents the visual definition of a black swan event, caused mass liquidations and functionality issues on leveraging platforms like BitMEX, where price ricocheted between $3,600 and $4,400 before crashing and preventing logins:
Bitmex insurance fund plummeting, Arthur doesn’t like this. Trading halted. pic.twitter.com/4yDL3KMO5I
— Bobby Axelrod (@OneX_Capital) March 13, 2020
Bitmex insurance fund plummeting, Arthur doesn’t like this. Trading halted. pic.twitter.com/4yDL3KMO5I
— Bobby Axelrod (@OneX_Capital) March 13, 2020
Liquidations also occurred on other platforms, with Ethereum holders experiencing issues on MakerDAO:
Just got 100% liquidated with my 1713 ETH CDP. F*ck me. This was 6 years of my life’s work. Vault #849 Will there be retribution’s for this vulnerability exploit? from r/MakerDAO
Where Next for Bitcoin?
The crash left the entire community shaking its head at the scenes, but what’s important is how Bitcoin reacts from here. It is tempting to think that it will usher in another bear market, but considering we are coming off the back of one this is less likely.
Interestingly, the last time Bitcoin experienced a daily sell candle of this magnitude was on January 14, 2015, when it fell from $230 to $152 – a 34% correction. This drop and swift rebound represented the bottoming of the 2014-15 bear market and acted as the launchpad for the bull run that followed.
Has Bitcoin Found the Bottom?
Bitcoin experienced a 46% recovery in the hours following the crash, but with panic still consuming all markets and the federal stimulus having little effect so far, we are in no man’s land when it comes to the immediate future.
It could well turn out that the $3,850 flash crash was the bottom and Bitcoin will soon be on the road to recovery, but there is simply no way of knowing right now. Only time will tell, but it is crucial to remember that Bitcoin’s fundamentals haven’t changed, and when the current crisis is over we will be able to rebuild, safe in the knowledge that the basics are as secure and well-functioning as ever.
