US, WASHINGTON (ORDO NEWS) — Bad slope – The meteoric fall of Bitcoin (BTC) on Thursday, March 12, will not have escaped anyone in the cryptosphere. Margin trading and leverage would be largely responsible for this collapse, including $ 1.2 billion in positions closed on BitMEX. But it could have been even more dramatic, if BitMEX had not temporarily cut its platform that day.
$ 1,200,000,000 liquidated in a few hours
When real ” Black Thursday ” cryptoactifs the market last week, the course of Bitcoin experienced a free fall , which even briefly led the king of cryptomonnaies below $ 4000.
Before getting to the heart of the matter, we must start by illustrating what is leverage . In classic trading (” spot ” in English), there is no leverage: to lose all your stake – say 1000 € – the asset purchased must go up to 0 € to lose 100 % of his stake.
Now, with a leverage x5 – for example – it is enough that the same asset lose 20% to lose all of its stake. So imagine with a lever x100: only 1% variation in the bad and the position is liquidated. In the cryptocurrency market, it is exactly the same as betting all your money on red or black at the casino, you will be just as lucky!
And it is unfortunately what happened on BitMEX March 12: with a price of BTC from $ 7 900-3 600 $ – or more than 50% drop – even the slightest effect of x2 lever may have been wound up. Result: $ 1.2 billion in positions closed on the BitMEX platform alone, in less than 24 hours.
When BitMEX shutdown saved Bitcoin from absolute zero
LongHash has closely studied the effects of “leverage” on the recent crypto market crash: shortly before the BitMEX platform went offline on March 12, there were only $ 18 million left in purchase orders compared to 200 million dollars of sell orders in the liquidation mechanism.
“When BitMEX decided to go offline, the price of Bitcoin started to recover on other exchanges, as the liquidation system stopped liquidating more BTC. In a way, the offline BitMEX acted like a circuit breaker, preventing the market from collapsing to unprecedented levels.”
According to LongHash, who quotes Ari Paul , managing partner of BlockTower Capi:
“When the price of Bitcoin fell below $ 4,800, investors did not choose to sell. The sales pressure came mainly from BitMEX and its large liquidations, which turned [automatically] into sell orders on the market.”
Brendan Blumer, the CEO of Block.one behind EOS, summed up the situation pretty well. In his view, as long as Bitcoin and cryptos do not constitute a market large enough to be decorrelated from other classic markets, the volatility linked to the effects of leverage will continue to take us through violent roller coasters … if the classic markets tumble, as this is currently the case.
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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.