Bitcoin‘s Christmas Dip: A False alarm Rooted in Low Liquidity
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News spread that Bitcoin (BTC) plummeted to $24,000 (about 34.61 million won) on Christmas day, but it was confirmed that it was actually a temporary phenomenon that occurred in a specific trading pair with little trading volume. The price change did not appear at all in major trading pairs, so it was not a market-wide problem.
One night of chaos turns out to be a problem with one trading pair
The incident in question occurred in the BTC/USD1 trading pair on Binance. Here, Bitcoin plummeted to $24,111 (about 34.77 million won) in just 3 seconds. Although the moment spread on social media and created anxiety in the market, the price did not fall below $86,400 (approximately 124.68 million won) in BTC/USDT, the core trading pair of Bitcoin.
According to blockchain analyst Shanaka Anslem Perera, this was simply a ‘crash that only existed in one order book’. simply put, it was not a decline in the overall price of Bitcoin, but a technical event that occurred in a trading pair with little liquidity.
Liquidity vacuum caused by promotions
Ferrera linked the cause of the incident to binance’s launch of a deposit product offering 20% APY on the USD1 stablecoin underlying the BTC/USD1 trading pair. due to this incentive, many investors exchanged their existing USDT for USD1, and as an inevitable result, sell orders for the BTC/USD1 trading pair disappeared and liquidity dried up.
Meanwhile, as one large sell order came in, the price plummeted in the BTC/USD1 trading pair where the order book was empty. The automated algorithmic trading system recognized this and bought at a low price, normalizing the price to $87,000 (approximately 125.43 million won) in 3 seconds.
A similar case occurred earlier this month, on December 10th. At that time, in the same trading pair, the price of Bitcoin plummeted from $96,000 (about 138.4 million won) to $76,000 (about 109.63 million won) within one minute and then recovered.
Past wounds that linger on the trader’s psyche.
Although this temporary plunge was independent of the overall market, the tension within the cryptocurrency community was significant. The price of Bitcoin has recently failed to exceed $90,000 (approximately 129.8 million won) several times and has encountered strong resistance. In addition, the large decline in which $12,000 (approximately 17.31 million won) evaporated in one day on october 10th left deep psychological scars on market participants.
According to one expert, “the sharp drop on October 10 shattered the market’s psychology,” and analyzed that an environment was created in which investors overreact to even trivial news.
Light trading pairs,exaggerated rumors… Flashwick’s Warning
this Christmas plunge clearly shows how promotional campaigns create areas of weak liquidity, which can lead to sudden changes in a single trading pair. At the same time, the influence of social media, which spreads rapidly with only a limited amount of information, is attracting attention again.
For investors, it is vital to understand the level of liquidity for each trading pair, and it is important to keep in mind that in new pairs with low trading volume, a single order
Binance Experienced a “flash Wick” Due to USD1 Deposit Promotion – Here’s What Happened
On December 26th, certain trading pairs on Binance experienced a sudden and significant price drop, often referred to as a “flash wick.” However, the overall market price, notably for major cryptocurrencies like Bitcoin, remained stable. Here’s a breakdown of the event and what Binance has said about it:
What happened?
The price decline was primarily observed in trading pairs involving USD1,a stablecoin on the Binance platform. According to Binance, the issue stemmed from a 20% interest rate promotion offered on USD1 deposits. This promotion effectively dried up the selling liquidity for these pairs. When a single large sale order was executed, the lack of available sellers caused a rapid price plummet. https://tokenpost.kr/archives/234791
was the broader market affected?
No. Binance clarified that the impact was limited. Major trading pairs with high volume, such as BTC/USDT, showed no significant price movement. The event was characterized as a technical issue specific to pairs with low liquidity.
Has this happened before?
Yes. A similar sharp price drop occurred in the BTC/USD1 trading pair on December 10th. This previous incident was also attributed to a combination of promotional events and resulting liquidity shifts.
what does this mean for traders?
Binance advises traders to carefully consider trading pair liquidity, promotional event schedules, and potential market reactions. They emphasize that investment risk is inherently higher in trading pairs with low trading volume.
Critically important Note: This summary is based on information provided by TokenPost.ai, which utilizes a language model. While efforts have been made to ensure accuracy, key content may be excluded or differ from the original facts.
Disclaimer: I am an AI chatbot and cannot provide financial advice. This information is for informational purposes only.
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