CoinMetrics: Sharp Bitcoin Drop on May 17 Engineered By Perpetual Dump on Bitstamp, Bitfinex
At the time of writing, Bitcoin – according to CoinMarketCap – is just under $8,300 and even though it’s less than half of its December 2017 all-time high, the Bitcoin market has been doing good numbers since it began its surge in early April. In the last two months, Bitcoin has outdone most assets in the cryptocurrency market as well as the traditional ones too.
However, about two weeks ago, – precisely on the 17th of May – the entire market lost significant value with Bitcoin losing more than $1,000 in the space of an hour. The drop was a sharp one, falling from $7,700 to $6,600 in such a short time.
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— CoinMetrics.io (@coinmetrics) May 29, 2019
A recent report has now brought to light that the sharp drop in the market prices was forced by major liquidations which were done to cause a long squeeze in the market. According to the CoinMetrics report:
“Focused selling was observed on Bitstamp’s BTC-US Dollar market resulting in a sharp divergence in Bitstamp’s price relative to other major exchanges. Bitstamp was likely targeted because, at the time, it was one of two constituent markets used in the calculation of Bitmex’s bitcoin index.”
The report further has it that the dump began on Bitfinex and then continued quite significantly on bitstamp. In addition, the Bitstamp sale seemed to have been deliberately planned so that the best possible price effect could be achieved. The price, however, was corrected not too long after. The CoinMetrics official Twitter page also expressed that
“we believe this move was likely engineered by taking advantage of a thin Bitstamp book.”
The CoinMetrics report also noted that traders are most probably encouraged to cause these sharp moves due to the ease with which leverage could be gotten and also how enormous an effect, the futures markets had. Also, the fact that the crypto market is largely disjointed and compartmentalized makes it easier for pumping and dumping to have very significant effects on the market.
Usually, there are certain long-term factors and indices coupled with market behavior that affect prices of crypto. However, this recent CoinMetrics report has now proven definitively that, however temporarily, there are moves that can be made to affect market prices in the short term, manipulating the market upwards or downwards, depending on why those moves were initiated in the first place.