BitMEX Investigates Flash Crash and Bitcoin Price Drop
BitMEX, a cryptocurrency exchange, is currently conducting an investigation into an unusual trading activity that resulted in a flash crash and subsequent drop in the price of Bitcoin on its platform. Late on Monday, the price of Bitcoin against Tether’s USDT stablecoin plummeted to as low as $8,900 on BitMEX, while other exchanges were trading it at well above $66,000. However, the price quickly rebounded and as of 4:10 p.m. Singapore time, Bitcoin was trading at $64,284 according to a report from Bloomberg.
Aggressive Selling Behavior Detected
A spokesperson for BitMEX stated that the company has thoroughly examined the incident and found evidence of “aggressive selling behavior involving a very small number of accounts that exceeded expected market ranges.” The spokesperson assured users that the exchange’s systems operated normally throughout the event and all user funds remain secure. However, no further details regarding the incident were provided by BitMEX’s spokesperson.
Bitcoin’s Recent Decline
Bitcoin has experienced a decline of approximately 14% from its record highs earlier this month. This decline followed a period of high demand driven by the launch of several spot ETFs in the United States on January 11. Despite the recent drop, Bitcoin is still up nearly 50% since the beginning of 2024. On Tuesday, Bitcoin faced an additional setback as it dropped by as much as 6.3% to trade at $63,140. As of now, Bitcoin is trading at $62,674, down by more than 7% over the past day. The leading cryptocurrency is down by more than 30% over the past week but still up by around 20% over the past month.
Grayscale Bitcoin Trust Outflows
The recent dip in Bitcoin’s price was seemingly triggered by a significant outflow of $643 million from the $25 billion Grayscale Bitcoin Trust (GBTC). This outflow marks the highest since GBTC transformed into an ETF on January 11. As a result of this massive outflow, the total spot Bitcoin ETF net flow for the day was negative $154.4 million. Bloomberg data indicates that the Grayscale Bitcoin Trust has experienced significant outflows, with $7.4 billion exiting over its first 31 trading days.
Reasons for Outflows
One reason for GBTC’s notable outflows could be its higher management fee of 1.5% compared to competitors charging less than 0.3%. Additionally, entities like Genesis Global Holdco LLC, amidst bankruptcy, have been selling off their GBTC holdings. The duration and consistency of the outflows have caught observers off guard, as there were expectations of outflows during the fund’s potential conversion. Though the outflow dropped to nearly $22 million in late February, it has rebounded and broken the decreasing pattern.
Hot Take: BitMEX Investigates Flash Crash and Bitcoin Price Drop
BitMEX is currently investigating an unusual trading activity that caused a flash crash and subsequent drop in the price of Bitcoin on its platform. The company has found evidence of aggressive selling behavior involving a small number of accounts, but no further details have been provided. Despite this incident, Bitcoin has experienced a decline but is still up significantly since the beginning of 2024. Additionally, Grayscale Bitcoin Trust has seen significant outflows, potentially due to its higher management fee and entities selling off their holdings.
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