Bitcoin's BitMEX Meltdown: A Stark Reminder of Crypto's Wild West

The crypto ecosystem was abuzz on Tuesday after an anonymous Bitcoin (BTC) whale caused a flash crash in the price of BTC on the BitMEX cryptocurrency exchange late on Monday after they market sold 977 Bitcoins, with the lowest fill price happening at $8,900. 

Bloomberg was one of the first outlets to report on the event, saying the exchange is now investigating “unusual activity” involving large sell orders on its BTC-USDT spot market overnight. 

While the large sell order caused Bitcoin’s price to plunge on BitMEX, it continued to trade at $66,000 on competing exchanges, including Coinbase, which provides pricing for the spot Bitcoin ETFs. 

The price of Bitcoin on BitMEX quickly recovered following the incident and has been trading in line with the rest of the market since. 

Following the flash crash, BitMEX sought to downplay any speculation that this portends an upcoming decline in Bitcoin’s price, tweeting, “‘Bitcoin down to $8,900 on BitMEX?’ Well, not quite the whole picture.”

“Yes, we are investigating potential misconduct by traders on our Bitcoin-USDT Spot market (Did you even know we offer Spot trading?),” BitMEX said. “However, this incident had NO impact on our billion-dollar derivatives markets. It did not move mark prices, and no liquidations were triggered by it because our indices are independent and battle-tested.”

“We create fair and equal markets for all by not employing internal market makers,” they said. “The BTC sell orders this morning were simply too big and frequent for independent market makers and other traders to react to. As is standard, our compliance team is investigating the accounts and transactions triggering this price movement.”

“Meanwhile, our trading platform continues to operate normally,” they added. “All trading is BAU, and all funds are secure. Deposits and withdrawals are being processed as usual, often within minutes.

“And PS: Next time you come across clickbait like "Bitcoin at $8,900 on BitMEX!" - remember that only @CryptoCapo_ himself can reliably claim a price below 12k!,” BitMEX said, poking fun at one of crypto’s biggest bears over the past couple of years, who regularly called for a sub-$15k Bitcoin. 

The incident also goes to show why many crypto traders put low priced “stink bids” on certain coins as there is always the possibility of getting such orders filled in the volatile and impulsive world of crypto.