A 5,000 BTC dump on Bitstamp likely caused the bitcoin price flash crash that occurred during the early hours (UTC) of Friday (May 17, 2019). Bitcoin plunged to as low as $6,100 on the exchange but has since recovered over $7,000 over the past few hours.
Whale Dump, ‘Fat Finger Error,’ or Bot Glitch
A trader on the Bitstamp exchange reportedly put up a sell order of 5,000 BTC at an oddly low price of $6,200. This move caused a massive price plunge on the exchange, setting up a temporary arbitrage opportunity.
The effect soon spread across the market to other exchanges with the BTC market average falling to about $7,100. As at press time, Bitcoin had rallied to $7,300 on most of the popular BTC exchange platforms.
Details are still hazy at this point but there are three likely theories for what happened – a whale dump, fat finger error, or a bot glitch. However, given the lack of significant volume variance at the time of the crash, it seems unlikely that the crash was as a result of a deliberate dump.
On the flip side, looking at the chart from Bitstamp, the dump occurred over a 10 to 12-minute period with the orders being continuously executing at consecutively lower levels than the market price.
Such a pattern reeks of manipulation but the tradeoff seems counterproductive unless they held high leverage short bets on another exchange, say BitMEX. Theoretically, the dump would cause massive liquidation of long positions thus ensuring profits for the trader.
As NO ONE will simply keep 5000 BTC on exchange, this is deliberately planned dump scheme, aka manipulation imo
That dumper can on one hand dumping on stamp with poor liquidity move the Bmx contract 100x short on Bmx to take huge advantage in stacking cheap BTC
— Dovey Wan 🗝 🦖 (@DoveyWan) May 17,