The panic caused by the depegging of USD Coin (USDC) from the US dollar manifested itself in the wrong order, costing traders $50,000 per Bitcoin (BTC), albeit for several minutes.
Bitcoin Price Sees $50K in ‘Thick Toe’ Error
The BTC/USDC pair on Binance flash spiked to $50,000 on March 12 around 7:00 pm UTC. The reason for the momentum spike is unknown and was likely due to a “big toe” operation of a large order.
The possible reason for the surge is likely due to the low order books for the recently launched BTC/USDC pair on Binance. The exchange listed the pair only a few hours before the impulse price increase.
According for a trader on Crypto Twitter, it is likely that a Bitcoin market order would exceed the limit of sell orders on the pair up to $50,000.
The pair’s trading price returned to the spot market price of around $22,000 minutes after the spike, suggesting that this was an isolated incident. Fortunately, the futures market was not affected by the BTC/USDC spot pair; otherwise, it could have triggered massive shorting.
But this is not the first time that cryptocurrency exchanges have experienced sudden crashes and spikes. Multiple exchanges in the past had similar issues, inciting anger and refund requests from affected clients.
Related: Deribit to Pay Users $1.3M After Bitcoin Price ‘Suddenly Drops’ to $7.7K
In August 2017, a flash crash in GDAX, now called Coinbase Pro, caused Ether (ETH) prices to plummet as low as $0.1 due to client error. Ether was trading at around $300 elsewhere at the time.
USDC Stablecoin Peg Recovers
The value of USDC fell to a low of $0.87 on March 11 after Circle, the issuer of USDC, revealed that it had $3.3 billion of exposure to the defunct Silicon Valley Bank (SVB).
USDC trading pairs have been choppy on other exchanges since the SVB revelations. On March 11, the BTC/USDC pair on Kraken skyrocketed to over $26,000 on fears about the USDC collapsing.
At the time, USDC was trading at a 10% discount, which would have cost Bitcoin around $22,200. However, the rise towards $26,000 indicates that panic is causing severe volatility.
Fears were amplified over the weekend due to uncertainty over the fate of SVB depositors. In response, the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation decided to bail out SVB and Signature Bank customers, but not shareholders and other stakeholders, restoring market confidence for now.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
