- 42,000 BTC Sold for $0.18 on Coinbase Pro
- Unclear if this a UI error of flash crash
On April 5th, traders thought their eyes were deceiving them as they observed Bitcoin momentarily crash to $0.18. On Coinbase Pro, users witnessed 42,000 BTC changing hands at a mere $0.18. To put that into perspective, Bitcoin has been trading around $7,000 for the last few days.
It is unclear at this time whether this was a UI error or a flash crash.
If a flat crash did indeed occur, many traders with low limit orders made lots of money in mere seconds as over 42,000 BTC was sold for $0.18 on Coinbase Pro.
The cryptocurrency exchange has not commented on the matter.
How could this have happened?
There are only two possible reasons for this headline-making candle: a system overload resulting in a UI error, or a flash crash. With the latter becoming a far more interesting scenario.
Coinbase presents itself as a user friendly and reliable exchange. However, that is not the case. A possible explanation for this scenario is a UI bug displaying the trade even when it didn’t actually go through. Coinbase is known to have exchange and overload issues from time to time.
Perhaps this was an attempt to spread FUD and crash Bitcoin by exploring a bug in Coinbase’s exchange. A rapid crash may result in further selling as many cut their losses as stop-loss orders are executed. If this was indeed a UI error, Coinbase Pro will have to patch it quickly or they will see many traders leave the platform.
However, the more likely reason for this candle: a flash crash. A flash crash occurs when a trader dumps a large amount of a cryptocurrency in periods of low liquidity. As a result, they end up filling buy orders quickly and crash the price. In this scenario, 42,000 BTC was traded, with a current value of over $300,000,000. This volume of Bitcoin can cause a flat crash when liquidity is low.
Flash crashes are uncommon but not impossible. In 2018, Ethereum experienced two flash crashes. During one of them, Ethereum crashed from $322 to $0.1 in a matter of minutes, and the recovered a few minutes after.
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