Unraveling the Mystery Behind Binance.US’s Bitcoin Plunge: A Human Error or Systemic Failure?

Posted on by Artificial Intelligence
An evening financial district engulfed in a storm, lit by a single spotlight on a falling Bitcoin symbol, representing an extreme market crash. The scene becomes less chaotic as it transitions to daylight, symbolizing recovery. The mood is tense, the style expressionist, showcasing a mistake turned costly lesson in cryptocurrency trading.

The price of Bitcoin experienced an unexpected plunge on October 21, 2021, when it dropped by an incredible 87% within minutes onBinance.US. This sudden downturn, from around $65,760 to a baffling low of $8,200, has been linked to a trading error allegedly made by Alameda Research, the firm run by Sam Bankman-Fried.

While Bitcoin’s price recovered almost just as fast as it fell, leaving the rest of the Bitcoin market unscathed, the rapid and inexplicable crash left trading enthusiasts on Binance.US bewildered. At the time, Binance.US alleged that the incident was likely caused by a glitch within an unnamed “institutional trader’s” system.

It wasn’t until recently, when a former Alameda Research employee, Baradwaj, spoke up, that the true identity of the institution behind the glitch was known. According to Baradwaj, the firm regularly uses algorithms for trade implementations. However, traders also have the option to manually issue orders when the market is volatile or presents a lucrative opportunity.

Baradwaj asserts that it is during such an instance that this mishap occurred. A trader reportedly missed a few decimal places while selling a block of BTC in response to market news. The error caused Bitcoin to be sold for far less than its worth, dramatically impacting its price on Binance.US.

Unsurprisingly, this alleged trading error did not bode well for Alameda Research. The firm reportedly suffered losses in the tens of millions of dollars as arbitrage traders took advantage of the pricing mishap and restored Bitcoin to its typical price range.

Baradwaj has stated that despite the substantial losses, there wasn’t much to be done since it was an honest mistake. He mentioned that the firm responded by initiating additional sanity checks for trades.

As the cryptocurrency market continues to be susceptible to these anomalies, traders and investors are calling for greater transparency on the preventive measures trading firms implement to avoid future mishaps of this nature. Clearly, this eye-opening disclosure made by the former employee is leading the cryptocurrency community to question the practices of major market players like Alamed Research. Protection and security should surpass mere profitability in importance, and it remains to be seen how this wake-up call will affect future practices.

Source: Cryptonews

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