Bitcoin plummeted 30% overnight. Players: Just one bite of food and it dropped $300

Text | Ratchet Pizzaring

On March 12, the digital currency market fell into a black hole.

Today, Bitcoin fell by more than 30%, setting a record for the largest single-day drop in six years. The plunge occurred in the evening, and within 15 minutes, Bitcoin plunged by 20% at one point, and more than 20 billion in market value was wiped out.

"Bitcoin dropped by $300 just when I was eating a bite of food. I was so scared that I didn't even dare to eat." An investor lamented.

It is speculated that the cause of this currency market earthquake came from the OTC (over-the-counter) market.

The U.S. sanctions on two Chinese Bitcoin merchants and the massive blocking of OTC transactions on exchanges led to a large number of OTC merchants selling their assets, triggering a collapse in the currency market.

The aftershocks in the digital currency market will continue.

"Black Week"

Those who just experienced Bitcoin’s Black Monday on March 9th would not have thought that what they encountered was not just Black Monday, but a “Black Week”.

On March 12, Bitcoin experienced its largest single-day drop in six years. According to data from Huobi Exchange, the highest price of Bitcoin today was $7,959.45, and the lowest price fell to $5,555.55. The maximum daily drop once reached 30%, far exceeding the drop on September 4, 2017.

Bitcoin's trend today (Source: Huobi)

CoinMarketCap data shows that the last time Bitcoin experienced its largest single-day drop was in December 2013, when the price of Bitcoin was only $600 and it fell 38% in one day.

Data from Huobi Exchange showed that the price of Bitcoin began to fall sharply at 18:32 this evening, hitting a low of $5,555.55 at 18:47. In 15 minutes, it fell by $1,500, a drop of more than 20%.

One cryptocurrency player said that he was eating when the price of the cryptocurrency plummeted. While he was eating, the price of Bitcoin dropped by $300, which frightened him so much that he dared not eat.

02 Misery is everywhere.

In June 2019, the price of Bitcoin reached its highest point of the year at $13,986. Now, with the expectation of halving in the cryptocurrency circle, the price of Bitcoin has also been "halved".

"Tonight's crash has hit the hardest the contract traders," said a cryptocurrency player. Huobi and OKEx's contract trading pages were once stuck.

According to Jinguozi data, in just one hour, OKEx had a liquidation of US$297 million, of which US$210 million was BTC; Huobi Global had a liquidation of US$117 million, of which US$52.7199 million was BTC; and BitMex platform BTC perpetual contract had a liquidation of US$644 million.

After the digital currency leader Bitcoin plummeted, other mainstream currencies were not spared, with the daily price declines of ETH and EOS exceeding 20%.

The declines of BCH and BSV even exceeded that of Bitcoin, reaching 39% and 46% respectively.

Decline of digital currencies on March 12 (Source: Huobi)

"There are not only black swans in the cryptocurrency world, but also black holes," said a player.

Due to the rapid decline, the word "BTC" became a hot search on Weibo. This is the second time in a week.

03 Reasons

"In 15 minutes, the decline exceeded 20%. Such a rapid collapse must have nothing to do with the macro market." Sun Sheng, a cryptocurrency investor, told Yiben Blockchain, "This plunge cannot be blamed on the epidemic or the U.S. stock market. Someone in the cryptocurrency circle must be dumping the market."

"From our monitoring of the digital currency market, the main reason for the plunge came from the OTC (over-the-counter) market," Wang Chaoliang, a senior cybersecurity expert, told Yiben Blockchain. "Many OTC merchants are panic selling their assets, causing the market to plummet."

Recently, OFAC (Office of Foreign Assets Control), the U.S. Treasury Department's regulatory agency responsible for overseas economic sanctions, issued an announcement stating that two Chinese Bitcoin merchants will be sanctioned by OFAC for allegedly providing money laundering services to North Korean hackers.

According to OFAC, North Korean hackers laundered the stolen assets from Japanese and Korean exchanges through Chinese Bitcoin merchants. Yesterday, Japanese police announced the arrest of two Japanese nationals for purchasing unidentified digital currencies on the dark web, which may be related to the theft of the Japanese exchange Coincheck in 2018.

Being sanctioned by the United States is a devastating blow to many OTC merchants - it means that their US dollar assets will be frozen, they will not be able to trade with Americans, they will not be able to do business with financial institutions in most countries in the world, and not only they themselves, but even their spouses and immediate family members will not be able to enter the United States.

The Chinese sanctioned by the United States are not hackers, but ordinary OTC merchants. Therefore, merchants in the entire OTC circle are in a panic.

The US sanctions are just the beginning. Many domestic OTC merchants are worried that the US sanctions will attract the attention of domestic regulators. "Someone may be arrested because of this," OTC merchant Chen Rui told Yiben Blockchain.

"Digital currency exchanges are prone to attracting the attention of criminals and money laundering gangs. Many exchanges do not have anti-money laundering transaction capabilities, and OTC merchants find it difficult to fully protect themselves, so account freezes occur from time to time," said Wang Chaoliang.

"Domestic OTC merchants will definitely do more domestic business. No one wants to deal with black money, but they will encounter black money more or less. There is nothing we can do about it," said Chen Rui.

The OFAC announcement showed that an OTC merchant surnamed Tian transferred assets worth $34 million through bank card accounts in China. If this fact is true, it is almost certain that some OTC merchants will not be able to escape domestic legal sanctions.

Panic reached its climax this afternoon. Many investors revealed that there was a large-scale blockade of cards in the OTC trading area of ​​the exchange, and many large investors and OTC merchants began to sell their assets, which directly triggered the Bitcoin flash crash this evening.

In the spot trading of Bitcoin, Huobi, OKEx and Binance have been competing with each other, but it is generally recognized in the industry that the market size of Huobi OTC is larger than that of the other two. However, tonight, Huobi OTC trading area was close to being shut down.

“There is only one page left in the USDT trading area, and the prices are all above 7.5 yuan, which is an absurdly high premium.” Sun Sheng said, “And seeing the price does not mean you can trade. Even if the seller is just refreshed, when you click the trade button, most of them will prompt that the seller has cancelled the order.”

In response, Huobi told Yiben Blockchain that the system had returned to normal at 21:40 on the 12th, and the abnormal transfer in the OTC trading area had been processed in the early morning of the 13th.

04 Panic

In fact, the digital currency market has been in extreme turmoil this week.

On March 9, the international financial market ushered in Black Monday. As the COVID-19 epidemic spread across the globe, the U.S. stock and crude oil markets plummeted. Within a week, the U.S. stock market was halted twice, which is rare in history.

Bitcoin, which is regarded by some as "digital gold", was not spared, and its price fell by 16% in two days. Unexpectedly, three days later, the cryptocurrency market experienced another sharp drop, hitting the highest level in six years.

“Speculating in cryptocurrencies is worse than speculating in Ponzi schemes. Speculating in Ponzi schemes is only hopeless when the moment they collapse, but speculating in cryptocurrencies is hopeless almost every day.” A cryptocurrency player sighed.

The sudden plunge caught many players off guard and even made them unable to accept it.

At noon today, Sun Sheng posted a message on WeChat Moments, listing the trends of multiple assets including US stocks, gold, crude oil, Bitcoin, etc. since the beginning of this year.

“Bitcoin is up 10%, the best of all assets,” he commented.

However, a few hours later, Bitcoin suddenly plummeted and became the worst performing asset among all assets. "Sorry to make you laugh." Sun Sheng posted another self-deprecating message on WeChat Moments.

"Digital asset investment is not suitable for most people. Be careful! You must have a big heart!" Li Xiaolai said on Weibo.

F2Pool founder Shenyu posted a picture of a falling candlestick chart on Weibo, with the caption: "The first long order for young people."

*The interviewees in this article are all pseudonyms.