Binance US witnessed a sudden crash in the price of Bitcoin, as it went from over $60,000 to merely $8,000 in the past 24 hours. Initially, the price fell by only 5.5% before it plummeted by a further 87% this morning.
Bitcoin’s Price Has Normalized On The Platform
In response to the unfortunate situation, the exchange has offered an explanation. According to the exchange giant, the recent Bitcoin flash crash on its US platform was due to a flaw in a trading algorithm.
Although the price of the cryptocurrency has normalized on the platform, it still got traders worried that such a situation can occur in one of the most trusted crypto exchange platforms in the world.
In a statement Binance shared to Bloomberg, the exchange explained that one of the institutional traders said there was a flaw in their trading system, which led to the sell-off.
Binance added that it’s still investigating the situation. However, it noted that the institutional trader has fixed the bug and the situation seems to have been managed.
According to Binance, the Bitcoin flash crash occurred at exactly 7.34 am New York time only on the Binance US platform. However, the impact also hit rival exchanges, as Bitcoin’s price on Kraken fell to $54,000 shortly before climbing back up. Overall, the price of Bitcoin fell slightly from its $66,000 all-time high to around $63,000.
Massive Impact On Traders Using Stop Loss
Flash crashes are common in the traditional finance and cryptocurrency industry. Since the industry is dependent on computerized trading, an error in the trading system could lead to this scenario.
When something unusual happens to the system, it can lead to the automatic selloff of a lot of the affected assets. Some exchanges are using different measures to protect investors’ and traders’ funds in situations like this. For instance, the New York Stock Exchange makes use of a circuit breaker to make sure trading on the asset is not possible when prices inexplicably drop.
Binance experienced a flash crash in December 2019, as the price of Bitcoin fell by nearly 90%. But the price went back shortly afterward.
Situations like these usually have a major impact on those who have placed stop loss on their trades, as their trades could be closed automatically.