What is Bitcoin flash crash?
Bitcoin flash is a sharp and sharp diving in the BTC market, which only lasts a short period of time before prices begin to normalize.
The emergence of unique market conditions leads to a tremor in the price of the leading cryptocurrency market. The reason behind a flash collision is a large group of sellers (called whales) that decides to sell Bitcoin (BTC) suddenly and flood the market by supply. This overcomes buyers and can erase billions of market in minutes.
The fact that the BTC flash accidents still have occurred in recent years highlighting the risks of continuous encryption volatility, even with strong encryption assets like BTC. Despite the state of the market in Crypto by billions of dollars, it is still mature.
In particular, for new investors in space, it is important to understand the BTC prices and why it is happening. Without this knowledge, watching such an event can be devastated and leads to emotional circulation decisions that have been ruled badly instead of insightful and profitable investment.
Do you know? Traditional stock markets contain built -in circuit breakers where trading is temporarily stopped when the original or index moves a certain amount. BTC markets do not have these circuit breakers, so it is difficult to control the high market drops.
How does Bitcoin flash?
It is often difficult to understand the speed and intensity of the flash crash. For the ordinary investor, it raises terror and may emphasize their deepest fears that their cryptocurrency will become value. But with a quiet head, the “Tripwire” of the BTC accident is usually associated with a certain set of interconnected factors.
Let’s take a look at how flash accidents occur:
- Filtering parking lots when markets move unexpectedly. If reformer traders cannot maintain their guarantees within a significant decrease in the market, the stock exchanges automatically sell their position to pay the loan. When this happens widely, it sends a wave of pressure through the market, which disrupts prices along the way.
- Trading errors in the algorithm can cause a series of sale orders. Many merchants use computer software with pre -rules. When these systems interact with unusual market conditions, commercial robots can start selling strongly. This then has a harmful effect, send sales signals and cause a series of automatic reaction for sale.
- Low market liquidity makes prices more sensitive to large trading. Think about this as more active sellers than buyers. For BTC, it is more prevalent in smaller exchanges as someone wants to sell a large amount quickly. It exhausts the purchase that is available immediately and causes a sudden decrease BTC.
- Technical defect in the exchange infrastructure can cause trading collapse. It can be one of the servers without connecting to the Internet, freezing data nutrition or conformity failure. This can lead to incorrect quotations and execution orders at maximum prices.
- The sale of panic occurs regularly during the frightening news events. As the old merchant says, “buy rumors and sell news.” When bad news explodes, markets can panic and everyone sell simultaneously, retreat from buyers and send low prices.
Do you know? In December 2024, BTC finally violated the $ 100,000 brand, but it fell to $ 94,000 within hours. In this process, more than 200,000 merchants were liquidated, causing losses of more than one billion dollars.
Bitcoin flash benefits
The superiority of the encryption market sends ice stab wounds through most investor bodies; Of course, they are very unfavorable market conditions in most scenarios. But once you overcome the initial shock, there can be some hidden benefits to explore it.
- Exceptional purchase conditions: Although the investors who suffer from panic, for those who are prepared, it provides a golden purchase opportunity to buy BTC at a significantly reduced price.
- Market stress test: Assuming that there is a rapid recovery, these types of events are a stress test to obtain a valuable vision on how markets interact under the maximum conditions.
- Higher Industry Practices: Provides an educational opportunity for platforms such as exchanging encryption to understand the error that has occurred and improving its infrastructure to avoid accidents in the future.
- Increased investor protection: Flash accidents attract the attention of the main media and organizers. This focus can be an incentive to improve organization and protection for retailers.
Do you know? Despite its reputation in accidents and fluctuations, BTC now shows signs to become one of the mature origins. It can be less volatile than many known securities, such as “wonderful 7”, which include NVIDIA, Meta, Tesla and others.
Examples of Bitcoin flash crash
There have been many BTC flash accidents since the launch of the encrypted currency in 2009. Some of the largest exchanges have seen that prices evaporate in minutes, and left market accidents at the market level for investors wrestling with improved portfolios.
On June 19, 2011, MT. Gox Exchange is notorious to violate the database and risk accounts. The BTC price was crushed from $ 17 to $ 0.01, almost without value. It was an early setback for MT. Gox and BTC, but revealed the weak early exchange and showed the need for a more powerful infrastructure.
Recently, on March 18, 2024, BTC Flash crashed on Bitmex. While other stock exchanges were trading more than $ 60,000, the price on Bitmex fell to $ 8900. All of this happened in just two minutes, but the recovery was fast, as it wore prices to normal levels within 10 minutes.
In addition, the BTC-EUR prices have decreased on Coinbase for a brief period from 63 thousand euros to 48 thousand euros, sharply diverged from other markets, such as I mentioned By Kaiko Research.
Cryptoquant Research Head, Julio Moreno, Stuck On the broken flash that witnessed a briefly decreased Bitcoin to about 88,800 on December 5, 2024. According to it, the flash crash was driven by a series of sale and clarification in the BTC Futures market, with an open interest with liquidation of long jobs.
Covid-19 was also responsible for a market collapse in March 2020 when the world’s most famous encryption was 50 % in two days. The price has collapsed from more than $ 9,000 to less than $ 4000. Then it took two months until the market prices returned to the previous levels.
How to protect against Bitcoin flash in the future
It is almost impossible to predict accurately. When they strike, things happen quickly. The damage usually occurs before a person interacts, especially when the situations are filtered and the circulating robots interact with the sales signals. But it is still possible to prepare yourself and protect you from the repercussions.
- Preparing price alerts at the main technical levels: This will help you alert you to the abnormal market conditions so that it is not closed.
- Use the leverage lightly. Flashs burn merchants high immediately. Therefore, you do not suffer from high -benefit market sites.
- Learn how to use a stop loss to protect the capital. This enables you to sell your site early in a crash, although they are not guaranteed, as a flash collision can fly in a loss of stopping in the worst cases.
- Keep the backup capital to give you the ability to take advantage of low market prices upon their arrival.
- Do not maintain the bulk of your property in the exchange account. Accidents can put platforms under severe financial pressure, so try to call your assets.
As they learned, flash accidents occur quickly and can be given positions in seconds, especially for translator traders. Keeping a variety of wallets, putting stop orders, and investing what you can only bear, is simple but effective ways to reduce risks during the sudden decrease in the market.
