Okay I've been look at this flash crash a bit more, and I have more questions than answers now.
Exchanges that crashed: Kraken (-18%), Gemini (-6.5%), BinanceUS (-87.5%), FTX (-11%)
These appear to be the #2, 3, and #4 exchanges in terms of USD volume in the US; with FTX being the only non-US exchange to flash crash. The #1 volume BTCUSD exchange in the US is Coinbase. For comparison, here are the volumes being reported on TradingView for the month of October:
- Coinbase: 320k BTC
- Kraken: 71k BTC
- Gemini: 37k BTC
- BinanceUS: 30k BTC
- FTX: $14.8B, or maybe about 232k BTC at todays price
- I'm assuming that those numbers for FTX must be in USD, but the reported numbers for the others must be in BTC, or else this wouldn't make much sense.
At 11:34:15, both BinanceUS and Gemini experienced their first down wicks simultaneously, with FTX and Kraken following 5 seconds later. No BTCUSDT pairs that I have come across had any similar crash. No other exchanges I came across had anything other than a maybe 2-3% crash during the same timeframe. Here are the reported volumes from the exchanges:
- Exchange: [BTC volume of 1-min candle at flashcrash] : [sum of BTC volume between 11:34 and 11:39]
- BinanceUS: 579 : 626
- Gemini: 325 : 397
- Kraken: 803 : 1179
- FTX: 192 : 449
- Coinbase: 81 : 405
So the first thing that stands out, is that FTX is supposed to be a large exchange with liquidity. So how did a sale of a mere 192 BTC for USD, flash crash the price by 11% ?? Someone said that BinanceUS is a shit exchange with thin orderbooks. Okay, but even if we concede that, the total Bitcoin sold in that 20-30 second period was only reported at about 1980 BTC across all those exchanges.
- How in the hell does a market sell of a mere 2k BTC cause a 7-18% flash crash across multiple exchanges??
- Who in their right mind would market sell in such a fashion on such thin orderbooks to cause that much slippage against themselves? Was this a case of "when bots attack"?
- Why didn't Coinbase get hit with similar volume numbers in those same seconds, and why were they largely unaffected?
- Why does this appear to have affected so heavily the major US based exchanges, but only 1 offshore exchange?
- Does FTX being affected have anything to do with Sam Bankman-Fried and the fact that he is a US person running that exchange? Time for a side trail ...
- Where the fuck did that guy come from anyways in 2019 to now be the richest person in crypto?
- He owns not only FTX (the broker / exchange), but also Alameda Research, a trading entity and liquidity provider that operates on the very same exchange that he runs.
- It's a massive conflict of interest to be both broker and liquidity provider / counterparty.
- How did he get such a sweatheart deal to receive 1/3 of all the Tether printed since 2020, via Alameda "Research"?
- Does the 11% flashcrash on his high leverage platform have anything to do with the fact that he is the liquidity provider and counterparty to trades on his own exchange??
- Did FTX and Alameda have any significant profit from this flash crash?
We have been seeing increasingly scummy behavior from places like Binance as well. We saw last week that Binance liquidated Eth positions when the price was nowhere near the liquiadation point, with customers saying Binance refused to compensate them anywhere near properly. During the May crash they liquidated customers who held inverse products that should increase in value when the underlying goes down.
The next questions to ask are, WHY NOW? Aren't we supposed to be heading to new ATH on the ahmazing strength of all the institutional fomo and buy orders happening??
- This doesn't have anything to do with Chinese toxic debt and its relationship to Tether does it?
- This can't possibly have any relation to the fact that 141,000 BTC are about to be unlocked and available for selling on the open market from Gox could it?
- Is there a relationship between [the huge 50% pump in 3 weeks that occurred almost out of nowhere on low USD volume] ... to ... this low volume flash crash?
A fat finger on BinanceUS doesn't explain this. Even a misbehaving set of bots doesn't explain this (given the very low volumes that caused it). It raises legitimate questions and suspicions about the state of liquidity in crypto. It yet again tends to invalidate the narratives about institutional buying and fomo supposedly happening right now.
But it does make alot of sense in the context of fraud. This appears to be yet another instance in a litany, a saga of fraud and criminality rampant in crypto. And it should make everyone consider what kind of large systemic risks and dangers might be lurking nearby right now.
YOU NEED TO PROTECT YOURSELF NOW. You need to risk diversify if you haven't already done so. Make sure that you're not lopsidedly exposed to any one particular type of risk. For example ...
- Whatever funds you leave on an exchange, need to be funds that you're okay with losing.
- If you're trading leverage, you're now at a high risk of being falsely liquidated (whether to the up or downside).
- If you're holding USDT or USDC, you could also be facing systemic risks that range from toxic chinese commercial paper causing a de-pegging; OR, a "reluctant" [rolls eyes] acquiescence to regulators; OR, or even criminal indictment, and the consequences that might have.
- And even if you're all-in on permissionless cryptos right now (Monero, BTC, Eth, etc), you're facing escalating probabilities of a major liquidity unwinding in crypto that sees you lose a large amount of value in a short amount of time, and entrance into the next bear market (if we're not already there).
So take anything you're not comfortable with losing, off the exchange. Unwind leverage trades, or at least start using less leverage on those trades. Take some damn profit! Seriously. Buy some gold/silver. And yes, even put some of that into (gasp) dirty fiat, so that you can live comfortably for a couple years if need be. Balance your stablecoin holdings with the kinds of risks you can tolerate. USDC for example is probably less likely to lose its peg, but more likely to force KYC you. USDT is probably less likely to KYC you without warning, but more likely to lose its peg.
Do any of those things have to happen? No. If none of those things happen, will I be here apologizing? NO. Again, when talking about trading and the future, we're dealing in probabilities, and we have to go by the evidence we have in front of us.
Yes we could continue up higher. I think that's less likely now, but it's still possible. Who knows, we might even see massive scam wicks to the upside as well. But every single goddamn piece of information and evidence that we're getting lately indicates escalating probabilities of what was previously very low-likelyhood but heavily damaging events. Those probabilities are not so low anymore.
Protect yourself, before you rek yourself.
