The reason for the sudden drop of the bitcoin rate to $24,111 on the Binance exchange, which occurred on December 24th, has become known.
On the eve of Catholic Christmas, the price of BTC against the stablecoin USD1 (USD1) plunged by more than threefold, yet the coin’s value soon returned to the level observed in trading pairs with other dollar stablecoins. Consequently, lucky individuals who managed to purchase BTC during the dump netted a large profit by selling them after the asset’s price recovered.
The Bitcoin Value Collapse
The director of the Solv Protocol crypto service, using the pseudonym Catherine is Solving, attributed the anomalous fluctuations in the bitcoin rate to a promotion launched on Binance, according to which exchange users could lock up USD1 at 20% annual interest. Upon learning of this offer, many traders began exchanging BTC for these stablecoins by placing market, rather than limit, orders, and due to low liquidity, bitcoin sharply decreased in price.
“This incident demonstrates that Binance is not involved in trading operations. The low liquidity present in new trading pairs means that even one large market order can greatly impact the price, but it will quickly adjust thanks to those engaged in arbitrage trading,” commented Binance founder Changpeng Zhao on the situation.
About the Author
