Trade volume breaks new record. Across the top Bitcoin and Ethereum spot markets, more than $70 billion in trades were executed throughout May 19th's sell-off, nearly double the next highest volume day (recorded on January 11th). Previous sell-offs have been linked to forced liquidations in derivatives markets, but last Wednesday's liquidations did not surpass April’s record which suggests that the selling pressure originated in spot markets. However, this does not mean that the many billions in liquidations did not contribute to Bitcoin's spiralling price.
Throughout the day, nearly every large exchange suffered some form of downtime or delays. The best metric to look at when analyzing exchange infrastructure is trade count, which refers to the number of trades executed for a trading pair. Trade count gives an idea about the raw number of transactions that an exchange's matching engine is able to process before suffering delays, lagging interfaces, or downtime. We charted the number of trades per day for the top BTC-USD pairs and can observe that May 19th's trade count was magnitudes higher on COINBASE than on any other exchange.
Coinbase processed 1.7 million trades for their highest volume pair, nearly double the number of trades on the next highest day. Most other exchanges saw only a marginal increase in the number of trades processed compared with similarly high-volume days. While crypto exchange infrastructure still lacks maturity, most exchanges were able to resolve their issues quickly on a day that caught many by surprise. Just one year ago, the 'Black Thursday' price crash caused exchange infrastructure to collapse. Today, with nearly quadruple the number of daily trades, downtime was far less severe which shows the pace at which exchanges have scaled their infrastructure over the past year.
Whale traders influenced markets during sell-off. Raw transaction data can reveal a lot more about micro market movements than aggregated volume data. Above, we chart individual trades made by "whale traders" on May 19th before and after Bitcoin's price crash. We define a whale trade as any market order greater than 5 BTC (around $100,000 at the time of the sell-off). Large trades give an idea of the sentiment and behavior of institutional traders during pivotal market events. Typically, institutional traders will break apart large market orders into smaller orders to prevent price slippage. However, Coinbase's order books are often liquid enough to support large market orders which is why we specifically analyze the BTC-USD pair.
We can observe that around 4am UTC, whale traders began placing large market sell orders as Bitcoin dipped below $40k, many valued at higher than $500k. Nothing much happened until around 1pm UTC, when the price began to plummet and the quantity of large sell orders surged. Around this time, Coinbase began experiencing intermittent downtime. In the aftermath of the sell-off, we can observe that whale traders began buying the dip in large numbers. This caused Bitcoin's price to surge above $40k, only to plummet once again as buying pressure dried up.
What is interesting to note is that the initial 4am sell orders were executed around midnight EST, an unusual time for large market movements. This suggests that these orders were not U.S.-based or they were algorithmically executed. (FTX/Alameda Perhaps ??)
