A Bitcoin ‘Flash Crash’ As Volume Spike Briefly Takes Price to $309

Once more is Bitcoin falling ….

Bitcoin Latest Price: $458.77, down 6.9% (via CoinDesk)

Crossing Our Desk:

– Bitcoin prices on Monday plunged – on a single exchange – in what’s being called a “flash crash” of the digital currency, after what appears to be a cascading series of trades that occurred in rapid fashion took the price of bitcoin all the way down to $309.

Even within the volatile world of bitcoin trading, what happened Monday was unusual. Prices were under pressure early. They started off the morning around $500, and began trending downward. A little bit before 8 a.m. New York time, though, there was a massive plunge on the BTC-e platform, and only there. Data provided to us by the analytics website TradeBlock showed that there were actually three trades that went off at $309, for a little more than one bitcoin in total, as well as at least 20 trades before and after those three that went off at $310. Well more than a thousand were recorded between $400 and $309.

In three minutes around those three $309 trades – from 7:42-7:44 a.m., there were 1,554 individual trades worth a total of 1,273 BTC, according to the data, in a pattern that looks very much like automated trading. That may not sound like very high volume, but there are entire days when the trading volume is only around 5,000 BTC. Volume on Monday was already above 26,000.

All of that took place on the BTC-e exchange; the low on Bitstamp was $445. The low on CoinDesk’s index was $435. It’s currently at $458.77. On BTC-e, the most recent trade went off at $443.99.

BTC-e is an opaque exchange – It’s not clear whether it’s located in Bulgaria or Cyprus, and the people running it keep themselves out of the public eye. The site notes its located in a “European time zone (GMT +2), which includes both locales. Our colleagues at MarketWatch described it as a “black hole” in a February profile, even as it became one of the biggest of the bitcoin exchanges.

The exchange does, however, offer some of the more complicated, and risky, kind of trading options that the big capital-markets exchanges offer, like margin trading and shorting. It’s entirely possible, as happened last week, that the initial trading was triggered by a margin call, forcing somebody to dump their holdings. That could’ve sparked a cascade of buy and sell orders. It’s hard to imagine otherwise why somebody would sell at that price.

Also, it’s not the first “flash crash” on BTC-e: a similar swan dive occurred in February, sending the price from $600 to $100 in a matter or minutes.

Trades in bitcoin don’t get unwound. That’s one of the key features, once a trade is confirmed in the blockchain, it’s set in stone. Absent some kind of overriding glitch, the trades are the trades.

In other words, somebody took a bath today, and on the other end, somebody, ahem, cleaned up.  (Paul Vigna)





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