The panic caused by the depegging of USD Coin (USDC) from the US dollar manifested in the wrong order, costing traders $50,000 per Bitcoin (BTC), albeit for several minutes.
Bitcoin Price Sees $50,000 in a ‘Thick Toe’ Error
The BTC/USDC pair on Binance flash spiked to $50,000 on March 12 around 7pm UTC. The reason for the momentum spike is unknown and was likely due to a “big toe” trade of a large order.
The possible reason for the surge is likely the shortage of order books for the recently launched BTC-USDC pair on Binance. The exchange listed the pair only a few hours before the price surge boosted.
According to a Trader in Crypto Twitterit 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 a minute 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 selloffs.
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.
In August 2017, a flash crash in GDAX sent ETH prices plummeting as low as $0.1 due to client error. Ether was trading around $300 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 a $3.3 billion exposure to the defunct US bank Silicon Valley Bank.
USDC trading pairs have been choppy on other exchanges since the SVB revelations. On March 11, the BTC/USDC pair on Kraken spiked above $26,000 on fears about USDC collapsing.
At the time, USDC was trading at a 10% discount, which would have cost Bitcoin around $22,200. However, the rally towards $26,000 indicates that panic causes serious volatility.
Fears were amplified over the weekend due to uncertainty about the fate of SVB bank depositors. In response, the US Treasury, Federal Reserve, and FDIC decided to bail out SVB and Signature Bank customers, but not shareholders and other stakeholders, restoring market confidence in the meantime.
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