The CEO of Hong Kong-based crypto derivatives exchange FTX has speculated that if BITMEX had not gone offline on account of “hardware issues” Friday morning, the price of Bitcoin could have crashed to zero.
Sam Bankman-Fried, a.k.a. SBF, mused in a thread on Twitter Friday morning that BitMEX may have pulled their exchange offline out of fear their liquidation engine could collapse the XBTUSD order book all the way down to zero, under the false flag of hardware issues.
1) Insane theory of the day: there was no BitMEX hardware issue.
— SBF (@SBF_Alameda) March 13, 2020
According to SBF, also the founder of crypto research firm Alameda, the BitMEX liquidation engine continuously drove Bitcoin down as it failed to liquidate enough BTC from leveraged long positions. SBF alleged the BitMEX order book was ten times too thin to balance the books, effectively creating a waterfall effect sending Bitcoin into a death spiral.
6) Well, this looked like it was happening today. There was $1m per 25bps or so on the orderbook, and constant $10m liqs. I think R was, in fact, > 1.
— SBF (@SBF_Alameda) March 13, 2020
Suspicious timing
Just before Seychelles-based BitMEX went offline the price of XBTUSD crashed 10 percent below the spot price and the funding rate collapsed to one of its lowest levels on record. Shortly after, Bitcoin staged a sharp reversal to the upside—dubiously during the 40-minute window the leveraged derivatives giant was offline.
SBF pointed to the timing of this rally, saying that the outage took BitMEX’s momentous sell wall off the market and allowed Bitcoin to recover. Stunningly, he also suggested the BitMEX team themselves may have deliberately shuttered trading in order to prevent further collapse and to avoid having to dip into the exchange insurance fund.
While figures are yet to be released by BitMEX, there are allegations the fund may have lost more than 2,000 BTC in the lead-up to the crash. As of Thursday, the fund’s balance stood at 33,881.2 BTC.
BitMEX responded to SBF’s allegation on Twitter, rejecting it as a “conspiracy theory,” and that in fact the exchange had been prepared for such an event.
"Insane" is right. Sam, you know better than to deal in this type of conspiracy theory, especially since you operate a platform in the space and under pic.twitter.com/NvNvUrYg0I
— BitMEX (@BitMEXdotcom) March 13, 2020
Atlanta-based mining outfit BitPico has drawn an even more grave conclusion, alleging the waterfall had been engineered by BitMEX. Without providing evidence, the BitPico group claimed BitMEX had used their own “bots and capital” to liquidate $993 million worth of long positions.
Per our analysis @BitMEXResearch liquidated $993 billion long positions using their own bots & capital. 2:43 UTC time activity across all exchanges stopped and @BitMEXResearch database crashed. Today’s $btc manipulation was caused by one entity. #bitcoin Investigation underway.
— ?itPico (@bitPico) March 13, 2020
BitMEX is by orders of magnitude the largest unregulated Bitcoin derivatives in terms of trading volume, and it has been blamed a number of times for exacerbating declines in the price of BTC on account of its mass liquidations.
Bitcoin | BTC
Updated: Mar 13 at 7:20 am UTCBitcoin, currently ranked #1 by market cap, is down 31.92% over the past 24 hours. BTC has a market cap of $93.85B with a 24 hour volume of $70.33B.
Chart by CryptoCompare
Bitcoin is down 31.92% over the past 24 hours.
