Black Thursday: What actually happened to Bitcoin?
March 12 is known as Black Thursday in crypto. The Bitcoin market crash of 2020 explored in today’s BTCMEX throwback.
The two Bitcoin price crashes happened on March 12, 2020, drawing the value down from $7,300 to $3,900, reshaped the exchanges’ scene, reshaped order books, and caused mass liquidations.
The crash came against the backdrop of a world waking up to realize that COVID-19 was more than “just a flu”. The S&P 500 plunged 9.5% in the biggest single-day drop since 1987 while gold dropped 3.5%, even though it usually serves as a safe haven. Meanwhile, oil had its worst week since 2008, losing a quarter of its value as Russia and Saudi Arabia continued waging a price war by pumping more oil into a slow economy.
Bitcoin fell more than 50% in the biggest single-day drop since 2013, with altcoins experiencing even more damage.
The first price crash happened roughly 10:00am UTC – 11am UTC, when Bitcoin’s price fell from $7,300 to a low of $5,690. The second a 11pm UTC – 2:15am UTC March 12–13th, dragged the price from $5,800 to a low of $3,900.
On March 12, an initial price drop led to initial liquidations, forcing leverage traders to sell off their collateral. This pushed prices down even further, which led to more liquidations and more losses.
Kaiko Data pointed out that the market crash was caused by the exogenous event – coronavirus outbreak. The global selling was followed by the stock market crash, followed by the leading crypto. The price movement caused mass liquidations on the exchanges and created more selling pressure. Order books then got whipped out and liquidations continued. More pressure resulted in the Bitcoin (BTC) price reaching the 3k bottom.
Order books are filled with bids and asks by market makers, who place limit orders at price levels surrounding the mid-price, creating the asset liquidity. The counterparty to market makers is price takers, who place market orders, which are executed immediately. During price crashes, market orders become far riskier, as price takers may receive a “bad fill,” in which a market order is filled at different prices based on the number of orders on the order book. When selling pressure builds, market sell orders can strip away all bids on an order book, demolishing order book depth and pushing the price of the asset down.
Two of the crypto platforms, BitMex, and Deribit, were each down intermittently for a few hours, leaving their traders unable to fund their account with much-needed margin and exposing them to heightened liquidation risks. BitMex went offline “for maintenance” for an hour right in the heat of the price collapse.
Mass liquidations resulted in traders losing trust in exchanges. Cointelegraph reported that On March 13, BitMex held 306,814 Bitcoins (BTC), in a month, this number had dropped to 222,025 – this represents a 38% decrease in Bitcoin holdings.
March 12 crash has dramatically changed the landscape of Bitcoin derivatives. This may have a significant impact on the Bitcoin market landscape, according to Coin Metrics, considering “BitMex’s outsized influence on price discovery.”
The price has recovered and the Bitcoin block reward has been halved on May 11, 2020. Since then the pioneer cryptocurrency is trading sideways in the mid-range of 9,000 USD.
Analyzing the global events and their impact on the markets at times of high volatility can help traders to identify the activity and adapt trading strategies, and improve price predictions or risk management.