On May 17, bitcoin’s (BTC) price experienced a “flash crash,” dropping to $6,400 within minutes, which was triggered by a 5,000 BTC sell-off — equivalent to around $35 million at the time.
An individual investor, speculated to be a whale — an investor holding a significant amount of bitcoin — is said to have placed a massive sell order on Bitstamp, a major bitcoin exchange based in Europe.
The sell order caused the price of bitcoin on Bitstamp to briefly drop to $6,400, which then led contracts on BitMEX, popular bitcoin margin trading platform internationally, to be liquidated in a short time frame.
BitMEX contracts were liquidated by the “flash crash” on Bitstamp because the bitcoin index of BitMEX heavily relied on Bitstamp’s feed prior to May 20.
Before the mass liquidation of contracts on BitMEX, the exchange’s bitcoin index was only dependent on Coinbase Pro and Bitstamp, and as the bitcoin price on Bitstamp plummeted, it consequently led the price of bitcoin on BitMEX to abruptly drop.
“Effective 22 May 2019 at 04:00 UTC, Kraken will be reintroduced into several of BitMEX’s Altcoin and Bitcoin Indices. This update is a reflection of a change in our Kraken market data feed handler from using Kraken’s REST API to their new Websocket API,” the BitMEX team said.
Could the incident hinder a bitcoin ETF approval?
Subsequent to the unforeseen 18% drop in the bitcoin’s price, researchers in the crypto industry — including Gnosis product developer Eric Conner — said that the incident could hurt the probability of an exchange-traded fund (ETF) gaining approval by the United States Securities and Exchange Commission (SEC) in the near term.
A whale crashes the entire crypto market 20% in 5 minutes with a single sell order on the books and people actually think an ETF is coming?