Liquidity decline fostered by BitMEX’s exchange policy has evolved as the primary reason for the recent plummeting prices witnessed by Bitcoin (BTC), suggests the latest analysis.
As per the report published by Datamish, Bitcoins worth $651 million were liquidated on BitMEX soon after the bitcoin price plunged from $9,500 to $8,000 within a few hours span. This lead to major cryptocurrencies like Ethereum and EOS plummet by around 20%.
The process of liquidation on margin trading platforms like BitMEX illustrates a situation where traders lose the positions that are leveraged as well as other positions shift to the danger zone of becoming liquidated as well. Earlier on September 24, 2019, when the BTC fell by 15% against the U.S Dollar, leveraged long contracts on BitMEX started to liquidate leading to a cascade of additional liquidations.
BTC price sulking was well-anticipated by many financial enthusiasts, however, what came as a surprise was the flashing speed with which the coin value plummeted. As per the data furnished by on-chain data solutions provider, CryptoQuant, this situation can be attributed to contracts worth ~$700 million becomings liquidated during this fall.
Shining as the largest bitcoin futures exchange, BitMEX is infamously known for influencing BTC price flows. The BTC outflows from BitMEX work as pointers towards the unwelcomed liquidations along with the mass volatility.
BTC outflows from BitMEX have a noticeable impact on the volatility of the digital coin which thereby leads to an appreciation or depreciation in the price value. The prime reason behind this is the exchange’s withdrawal policy which allows the investors to withdraw only once in a day at UTC 13:00. The restricted withdrawal time-frame renders to an excess of outflows over inflows. All this eventually end up in liquidity shortage and a rise in the spread.
As per the on-chain data, when there is a withdrawal of more than 5,000 BTC in a day, the threat of this volatility increases multiple times. This is because of the fact that when the bitcoin outflow on the exchange platform crosses a certain level, the potential for such large shifts increases dominantly.
On September 24, it was shown that 49141 Bitcoins were withdrawn from the BitMEX wallet. Within 5 hours, the volatility curled up leading to a price fall of over 8%.
Recently, BitMEX CEO Arthur Hayes created a buzz with his statement when he opined that Satoshi Nakamoto, the profounder of Bitcoin, is already dead. The spearhead gave his views and considerations regarding the anonymity hovering over the creator of Bitcoin.