25 Oct 2021
Flash crash on Binance.US
A massive flash crash occurred on Binance.US on Thursday, leading to a market wide sell-off.
On Thursday 11:34:17 (UTC), something out of the ordinary occurred on Binance.US. A sudden massive selling pressure cleared the order book on Binance.US, leading bitcoin to trade at lows of $8,200 on the exchange from 11:34:20 to 11:34:30.
The volume on Binance.US exploded. In these 13 seconds, 550 BTC shifted hands on the exchange. For reference, the average 13-second sell volume on Binance.US sat at 0.74 BTC in the 4 hours leading to the crash, illustrating that this massive sell order was a sell order far out of the ordinary.
What caused the crash? A fat finger by someone meaning to place a limit sell order at $82,000? An engine error? A combination? Binance has stated that it was caused by a bug in the trading algorithm of one of the institutional traders on the exchange.
The chaos led bitcoin to plummet in other exchanges in the following seconds. At 11:34:40, the BTCUSD pair at Binance (International) traded at $64,475, $1000 lower than it did 20 seconds prior.
As the Binance.US price normalized, one outlier appeared as the seconds went by. Kraken’s spot pair began trading at a growing discount in the seconds following, and at 11:34:54, Kraken traded at lows of $55,500 while most other exchanges traded at around $64,000. We’ve reported several times this year that Krakens spot market tends to struggle in a high volatile environment, and this event was yet another example of Kraken’s shaky liquidity.