Bitcoin’s price fell 14% in a period of just 30 minutes following a ‘flash crash’ on exchange Bitfinex yesterday night.
The CoinDesk Bitcoin Price Index had been holding steady between $250 and $255, but dropped to a low of $214.36 just before midnight (UTC). In the same period, the Bitfinex price sunk 29% to $179.35.
A tweet by the company at 03:22 this morning read: “The selling that occurred during the dump were legitimate sell orders and positions being margin called. Lenders were not affected.”
Alongside a regular buy/sell orderbook, Bitfinex offers margin trading, meaning users can borrow funds from the platform’s lenders – known as ‘peer liquidity providers’ – at a rate of interest to trade bitcoin. These users place ‘long’ or ‘short’ bets on whether bitcoin’s price will rise or fall.
When the price shifts suddenly, as it did yesterday, ‘long’ users who have borrowed funds may see their account equity drop to zero – at which point Bitfinex will automatically liquidate their positions. This