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- The crypto market continued to decline following October 10. Trading firms lost money and reduced their activity.
- Binance suffered from a technical fault that caused mass liquidations. The issue prompted a refund to users, and led to debates about the manipulation of markets.
- Some analysts expect greater stress until the market stabilizes. Others blame natural unwinding, while others cite price manipulation.
Tom Lee says the market for cryptocurrency has been under pressure ever since 10 October. Analysts have attributed this decline to liquidity issues among trading companies and technical problems at major exchanges.
Tom Lee, of BitMine, told CNBC large firms that provided liquidity suffered significant losses in capital during the October 10 crash. The sudden withdrawal of capital from these firms was a shock to them, as they help maintain the price stability on exchanges. according Lee.
Lee said that trading firms reduce their activities when they lose money by cutting back on trading, limiting the risk, and selling assets for cash. Lee explained how this pressure to sell can cause prices to fall further, leading them into more asset sales.
Lee According to a report, the process of unwinding is a long-term one. In 2022, he noted that similar situations took approximately eight weeks for stabilization. According to Lee, the current market has been in a stress cycle for six weeks, which suggests that additional time could be required before stabilizing.
Tom Lee: October crash is a major blow
Market observers believe that a technical issue may have accelerated the selling. The stablecoin USDe displayed briefly a lower price than intended on a single exchange, but other platforms had it close to its target. The internal oracle software of the exchange accepted the lower value as valid and liquidated many accounts.
Lee said to CNBC, the problem was due to an automation error in which CNBC relied more on the internal prices of the exchange than the aggregation of data from various sources. He likened the problem to an incorrectly inputted margin call.
Reports state that the liquidations were spread over several platforms. They affected two million accounts. Many of these had shown profits just minutes before. The exchange has not disclosed which companies were affected by this malfunction.
Binance has posted screenshots of the event on Oct. 10, and also Oct. 11. Binance reported that the event occurred on Oct. 10 and 11. Screenshots from these dates show this depeg.
Lee has described the glitches as code errors comparable to past Failures structural in another market where one problem can have cascading consequences.
Mike Alfred is a Bitcoin trader who stated in social media that participants use futures and derivatives as a way to push prices down. Alfred claimed the goal was to force out traders, which had entered at higher price levels. Lee agreed with this statement, causing a debate amongst market watchers.
The critics of this theory argue that these claims appear regularly in times of market declines. suggested The selloff is a natural process that occurs after traders were overexposed by heavy purchases during the peak price period. Other people questioned whether manipulation theories should focus only on the price drops, and not consider that market movements can occur when participants assess risk or leave positions during times of increased concern.
In the current market downturn, the debate shows the tensions that have been heightened in the cryptocurrency industry.
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Source: crypto.news
