Bitcoin (BTC) breaks $150,000?...Bitfinex system error causes liquidity 'gap'

▲ Cryptocurrency Trading

A momentary liquidity vacuum occurred in the perpetual futures market of virtual asset exchange Bitfinex. An unprecedented system error caused the price of Bitcoin (BTC) futures to surge past $150,000, reaching as high as $153,960.

According to U.Today on September 21 (local time), extreme price distortion occurred in Bitfinex's BTC-PERP perpetual futures trading pair due to a sharp increase in volatility. While spot Bitcoin was trading stably around the $85,000 mark, the futures contract price momentarily skyrocketed to $153,960. The price distortion resolved in less than a minute, and the futures contract has now settled back to the $85,038 level, returning to its normal range.

The Bitfinex composite spot price index did not exceed $84,406 amidst the volatility, confirming that there was no disturbance in the spot market. The market attributed this abnormal surge to a chain reaction of a large-scale short squeeze (buying pressure that occurs to liquidate or cover short-selling positions). According to Coinglass data, 117,116 leveraged positions were forcibly liquidated across the entire market in the past 24 hours. The total liquidation volume amounted to $688.07 million.

The majority of the losses were concentrated in short (bearish bets) positions. Short position liquidations alone accounted for $598.27 million of the total liquidation amount. In Bitcoin alone, $354.93 million in liquidations occurred, of which $338.15 million were short positions. The largest single liquidation order was a $11.29 million BTC/USDT contract on the Binance exchange.

Local price increases triggered automatic execution of stop-loss orders, forcing traders to liquidate short positions at market prices. Analysis suggests that a momentary liquidity vacuum was created as buy orders flooded the thin Bitfinex order book. While arbitrage bots immediately narrowed the price differences between markets, normalizing prices, it once again highlighted the high leverage risks in the virtual asset derivatives market.

[Key Article Summary]

- Due to a liquidity vacuum in the Bitfinex perpetual futures market, the price of Bitcoin (BTC) momentarily surged to $153,960.

- Over the past 24 hours, $688.07 million worth of positions were forcibly liquidated in the virtual asset market, with short positions accounting for the majority.

- The spot price of Bitcoin maintained the $85,000 level, indicating no impact on the overall market trend, but high leverage risk was highlighted.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*