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Unprecedented Market Crash: Binance Experiences Nearly 20% Fluctuation in One Minute, FTX Withdraws Completely, DeFi Protocol Sees $900 Ether

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Unprecedented Market Crash: Binance Experiences Nearly 20% Fluctuation in One Minute, FTX Withdraws Completely, DeFi Protocol Sees $900 Ether

The weekend's decline in the cryptocurrency market has sparked various speculations, including "largest mining hub in China experiencing power outage" and "rumors of regulation by the U.S. Treasury Department." However, an analyst believes that this is due to "excessive leverage by new retail investors" and "failure in stress testing of technical infrastructure."

Here, the technical aspect refers to the exchange systems. Adam Cochran, data analyst and partner at venture capital firm Cinneamhain Ventures, shared a series of opinions on Twitter, suggesting that Binance may be a major factor behind this recent downturn.

Market Crash Anomaly

The Block's research director, Larry Cermak, pointed out on Twitter yesterday, 4/18, that during the crash, the price of Ether on Perpetual Protocol briefly dropped below $900, which he found to be incredibly insane. He stated:

The $10 billion liquidation on centralized exchanges is actually a stress test for these DeFi protocols. Some are doing fine, some are really bad, and the soaring Ethereum gas fees are making it impossible to use right now.

Perpetual Protocol then announced on Twitter that they will hold a community meeting today, 4/19, to provide a detailed explanation of the flash crash event.

In addition, abnormal price movements were also observed in Binance Futures that did not appear in other futures contracts. The 11:35 AM candle on the 18th had a low of $50,050 and a high of $58,839, a fluctuation of over 17%, which occurred within just one minute.

Source: tradingview

Is Binance Futures Leading the Market?

Analyst Adam Cochran mentioned that while the "U.S. Treasury regulation rumors" may be a factor in the series of liquidation events, they are certainly not the cause. He believes that it's a situation where many things went wrong simultaneously, with exchanges possibly being the main cause. He listed the conditions that led to this disaster as follows:

  • Low weekend liquidity
  • Exchanges offering leverage up to 100x
  • Too many promoted junk projects surging, along with hedging positions
  • Significant volume near the "market price" in the futures market, but overall lack of depth
  • Too many retail traders getting liquidated, order books failing to trigger stops, leading to further liquidations

Cochran emphasized that obtaining precise data at the moment is unlikely, so it's feasible to interpret market behavior based on informed speculation. While Coinbase's drop was within the average range, Kraken had low trading volume and is unlikely to lead the market, FTX was almost behaving normally, leading him to infer that Binance was the main cause of the crash.

Is Blaming Binance Entirely Justified?

Sam Trabucco, a trader at Alameda, also shared his views on Twitter, stating that a significant amount of capital flowed into futures markets on certain highly leveraged platforms, excessive leverage leading to a large number of liquidations. Not only did the open interest in Bitcoin futures increase, but the positions in various altcoins were even larger.

Source: @AlamedaTrabucco

According to data from Bybt, Binance accounted for about 50% of the liquidations on the 18th. The Skew data platform showed that the total trading volume on that day was $151 billion, with Binance accounting for $52 billion, approximately 34%. Therefore, it can be concluded that Binance's liquidation volume on that day was indeed much higher than other platforms.

This does not completely prove that Binance caused the market drop, as excessive leverage was also a major factor. However, Binance once again experienced issues with placing orders, and in the past, there have been frequent outages during periods of high trading volume, which should be addressed immediately.

FTX, which managed to weather this downturn, with its founder stating that there were no shutdowns this time, only withdrawals were delayed due to network congestion. He later retweeted Cochran's analysis article, mentioning that he was also unsure of what caused the crash, but many exchanges were certainly overwhelmed by it.