Bitcoin fell for eight consecutive days: $200 million long contracts were "exploded", and exchanges encountered a crisis of trust in currency withdrawals

Since September, the global capital market has been volatile, and the encrypted digital currency market has been equally turbulent. Digital currencies, led by Bitcoin, have experienced a rare "eight consecutive declines" since September 2. After surging to $12,000 per coin on September 1, they plummeted rapidly, falling below the $10,000 mark several times, causing investors in the market to suffer heavy losses due to their long contracts being liquidated.

"At the end of August, I opened a $50,000 September Bitcoin long contract position on an exchange, expecting that the price of Bitcoin would fluctuate between $10,000 and $13,000 within a month. However, I didn't expect that in just one week, the price of Bitcoin would fall below the $12,000, $11,000, and $10,000 levels. I didn't even have time to cover my position before it was directly liquidated by the exchange." Zhang Ming (pseudonym), an overseas digital currency speculator, told the China Times reporter on September 6.

On the one hand, digital currency bulls suffered heavy losses due to the continuous plunge in Bitcoin in early September; on the other hand, there were investors who tried to withdraw money through digital currency exchange websites, but were unable to do so. Even if they made a profit, they were unable to withdraw the money, and they also suffered losses.

"I opened an order for 10,000 okKinkusd perpetual contracts on August 26, and traded 1,757 contracts on August 27. After the settlement at 4:00 on August 27, 8,243 contracts disappeared out of thin air, and the available perpetual coins were 0. Not only was there no liquidation, but I should have made a profit, but tens of thousands of dollars disappeared inexplicably. I consulted the customer service about the situation, but it was not resolved for a week. In the later stage, they simply disappeared." On September 7, a domestic investor posted on a related website.

According to our reporter, the situation of being unable to withdraw coins from exchanges is not only seen in small and medium-sized exchanges, but also in the top three exchanges, which has caused doubts in the entire cryptocurrency circle for a while.

Bitcoin plunges, causing long positions to be liquidated

Although Bitcoin is hovering around $10,000, the risk of speculating in digital currencies is much higher than other investment products.

"It is very risky to be bullish or bearish on digital currencies now, because with the increase in uncertainty, the frequency of fluctuations of hundreds of dollars a day, taking Bitcoin as an example, will increase greatly. Although digital currency transactions claim to be transparent and trustworthy based on blockchain technology, it is difficult for small retail investors in the currency circle to make money when there are many internal transactions and unstable exchange systems. Unless there is a trend of a sharp rise in digital currencies, it is a gambler's behavior." Wang Heng, a senior industry analyst, told the China Times reporter on September 8 about the current digital currency market situation.

According to the statistics report of Hetongdi, on September 9, the total liquidation of the digital currency contract market was 86.04 million US dollars, and the number of liquidations was 8,976. Among them, Huobi liquidated 22.89 million US dollars, OKEx liquidated 13.21 million US dollars, BitMEX liquidated 13.58 million US dollars, Binance liquidated 21.48 million US dollars, and Bybit liquidated 14.89 million US dollars. The top three currencies in terms of liquidation amount were BTC 62.01 million US dollars, ETH 15.33 million US dollars, and TRX 2.77 million US dollars; on September 8, the digital currency contract market liquidated more than 101 million US dollars, BTC contracts liquidated 66.64 million US dollars, and the number of liquidations was 11,553. Among them, Huobi liquidated 31.51 million US dollars, OKEx liquidated 19.04 million US dollars, BitMEX liquidated 16.51 million US dollars, Binance liquidated 22.37 million US dollars, and Bybit liquidated 11.82 million US dollars. The top three currencies in terms of liquidation amount are BTC with USD 66.64 million, ETH with USD 21.53 million, and EOS with USD 3.60 million.

In the global market, the amount of digital currency contracts liquidated in two days reached nearly US$200 million.

Just on September 10, the CME Bitcoin futures contract with the highest trading volume, September 2020, closed down $605 at $10,015, a drop of 5.7%. The October, November and December 2020 contracts closed at $10,090, $10,150 and $10,205 respectively.

"Judging from the market situation of Bitcoin futures, there will be no big market trend for Bitcoin this year, but sudden changes cannot be ruled out. Because the information in the digital currency market changes rapidly, after beating the long position today, the short position may be beaten tomorrow, and the giant sharks in the market may attack both sides at any time." In this regard, Huang Yijiajia, a senior cryptocurrency player in Shanghai, analyzed to our reporter.

As of the early morning of September 10, the price of Bitcoin closed at around US$10,363 per coin.

However, there are still many people who are bullish on Bitcoin in the market. Jeff Booth, an overseas Bitcoin commentator, said in a live broadcast on September 7 that assets like Bitcoin are very important in today's macroeconomic situation, and a deflationary world requires a deflationary currency.

"The fact is that Bitcoin occupies a natural position among gold, silver diamonds, real estate, etc., all of which can be used as a store of value and is one of the few assets with high S2F figures. I think even if they don't print Bitcoin, it has advantages over gold, for example, it is easy to verify and carry." said Jeff Booth.

The exchange no longer allows withdrawals?

Every time Bitcoin fluctuates greatly, there are always "strange things" in the market, and exchanges are almost always involved. In the past, there were things like hackers stealing coins, exchanges running away, and exchange system failures. This time, there was a strange situation where there were no coins available for withdrawal.

“When I was withdrawing money from a certain exchange, I actually received a text message notification saying that the review failed. This exchange is one of the best in the industry, but such a large exchange actually has a problem of not being able to withdraw money. It seems that the shortcomings and weaknesses of centralized exchanges are becoming more and more exposed.” Xiaojie (pseudonym), an investor in Shanghai, revealed to our reporter on September 6.

According to Xiaojie, in addition to the disappearance of the previous perpetual order, another large digital currency exchange directly closed the ETH withdrawal channel. Not only is it impossible to withdraw money, even internal transfers of ETH are not allowed.

“Only allowing users to withdraw USDT, but not ETH, will even the ETH fund pool of exchanges like OKEx be emptied? Outsiders don’t know how many real coins and how much virtual coins there are in centralized exchanges.

Centralized exchanges have always been suspected of selling empty money. When everyone withdraws money, there is not enough money to withdraw. If this is the case with the top exchanges, other small centralized exchanges are even more likely to suffer. "Xiao Jie questioned.

The China Times reporter also learned that many cryptocurrency speculators have recently posted in various investment groups saying that they cannot withdraw their own coins. It seems that storing coins in centralized exchanges is unsafe. Some people have even launched a "coin withdrawal campaign" online to withdraw all digital currencies in the exchange.

The main reason for this is that a currency called DeFi (decentralized finance) issued by the cryptocurrency circle has experienced a sharp drop. Investors have exchanged DeFi for ETH (Ethereum), resulting in a decrease in the ETH stock of major centralized exchanges.

“That is to say, there is a high possibility of falling into the dilemma of not being able to withdraw coins, and even a large number of exchanges may run away due to withdrawal runs. If there really comes a day when the coins in several major exchanges are not enough for everyone to withdraw, once the withdrawal dilemma continues, users will panic sell, which is likely to cause a sharp drop in mainstream coins and even a major reshuffle of the industry.” Xiaojie believes.