Bitcoin [BTC] Price Flash Crash to $7700 on Deribit – Here’s How Market Reacts to it

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Bitcoin [BTC] Price Flash Crash to $7700 on Deribit – Here’s How Market Reacts to it

Bitcoin [BTC] went haywire on 31st October on a couple of exchanges as price dipped to as low as $7700. The reason has been attributed to the maintenance shutdown of Coinbase Pro during 21: 00 hours UTC when the drop was witnessed.

Deribit Exchange was the most affected by this.

deribit exchange flash crash
Screenshot of Flash Crash at Deribit Exchange (Source: Tweet)

The most bizarre situation was seen at BTSE as it recorded a $15000 wick followed by a melt-down to $6500.

Coinbase price recorded a gap of $50 on the hourly chart as the abnormality crept in the price.

btcusd coinbase chart
BTC/USD 1-Hour Chart on Coinbase (TradingView)

The long/short ratio on Okex vividly describes the shift in market sentiments that occurred following the break. It has formed a cup with revival seen in the past few hours.

bitcoin long short cup
Bitcoin Futures and Perpetual Swaps Long/Short Ratio on Okex

What Caused the Drop Manipulation or Inefficiency?

The bots and the algorithm are to blame for the event. The pricing model of most exchanges is inter-dependent. Hence, a shut-down or malfunctioning of one creates ruckus in the other as well. However, the exchanges must be prepared for such events.

According to Su Zhu, the CEO of Three Arrows Capital and research lead for Deribit Exchange, all manipulation doubts can be thrown out the window. He tweeted,

This reminds me of knight capital’s blowup in US ETF markets where an errant algo lost $400m in under an hr just negative scalping every ETF

Whoever is doing this def not making money

Deribit Exchange immediately responds to the issue and also offers reimbursements. According to the exchange, the total estimation of loss due to the move is about $1.3 million. The price of Bitcoin for the calculation of damages will be $9160.

Price Reaction Post the Glitch

The sudden turn of events caused a flip in the market sentiments as the break-down was expected to have bearish after effects. The funding rate on BitMEX dropped instantly, and about $19.14 in longs got liquidated at BitMEX (according to Datamish).

However, the short positions on Bitfinex dropped to its yearly lows, as the long to short ratio broke above 5.3 on the exchange.

btcusd short low
Bitcoin Derivatives Short Orders on Bitfinex (TradingView)

The reason for the volatility has been addressed, and the victims have been paid. However, the price of Bitcoin has dipped to test support once again. The daily low in Bitcoin price is $9055, with the 200-Day Moving average at $9050 maintaining support.

Nevertheless, the fear and greed index for Bitcoin also did not budge after the bizarre move. The revival of bullish sentiments and the increasing suspicion of a fake-out could further find bullish strength. The day and week’s closing will be instrumental in deciding the short-term trend for Bitcoin.

Are you bullish or bearish at the moment? Please share your analysis with us. 

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Bitcoin [BTC] Price Flash Crash to $7700 on Deribit - Here's How Market Reacts to it
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Bitcoin [BTC] Price Flash Crash to $7700 on Deribit - Here's How Market Reacts to it
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Bitcoin [BTC] went haywire on 31st October on a couple of exchanges as price dipped to as low as $7700. The reason has been attributed to the maintenance shutdown of Coinbase Pro during 21: 00 hours UTC when the drop was witnessed. 
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Author: Nivesh Rustgi

Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com

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Nivesh Rustgi 689 Articles

Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com

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