The US arm of popular crypto exchange Binance has recently been in the spotlight for a slew of reasons, including regulatory scrutiny from market watchdogs. Now, another incident has put the exchange under the microscope – a ‘flash pump’ that saw Bitcoin briefly spike to an eye-watering $138,000 on its USDT market. This represents a surge of nearly 400% higher than the spot prices seen elsewhere.
Although short-lived, lasting only a few seconds, this anomaly has drawn attention to the exchange’s ability to provide a smooth trading experience, especially for major cryptocurrencies like Bitcoin. Binance.US’s website shows that during this price spike, 62.22 BTC changed hands, equating to roughly $1.8 million at current prices. This suggests that someone may have executed a large market buy order using USDT momentarily causing low liquidity.
Interestingly, such events are typically associated with ‘flash crashes’ rather than sharp price increases. Binance.US experienced a similar situation in October 2021, when Bitcoin’s price briefly plunged by 87% from $65,000 to $8,200 before swiftly recovering. The exchange blamed a faulty trading algorithm for the incident. A similar event occurred in December 2018 when the price of Ether on Coinbase Pro dipped from $100 to $13, only to bounce back within minutes.
The recent ‘flash pump’ on Binance.US brings into focus the exchange’s ongoing liquidity struggles. Amidst its regulatory disputes, the platform has had a hard time retaining banking partnerships, consequently affecting its liquidity levels. In the past, this has led to traders paying premiums of more than 3% on Bitcoin and similar amounts for Ether compared to rival platforms. Analysts have also attributed these price discrepancies to liquidity challenges faced by the exchange. However, it is worth noting that these premiums have since closed.
While the Binance.US exchange is working to improve its services and navigate the regulatory landscape, such incidents do raise concerns for users and provide fuel for skeptics. It is crucial for the exchange to take necessary measures to prevent such occurrences, ensuring a smooth and secure trading experience for its users in the future.
Source: Blockworks
