Bitcoin briefly rallies to $57,000 after a “glitch” on Bitfinex

On May 2, 2023, bitcoin prices spiked to $57,000 in less than a minute on Bitfinex in an unconfirmed glitch. 

Bitcoin’s price spiked due to an unconfirmed glitch

Bitcoin’s price rose from  $28,000 to $57,000 in a few seconds on a trading volume of 231 BTC, worth $7m. However, prices swung back to $28,000 on falling trading volumes of just 69 BTC a few seconds later.

Afterward, coin trading resumed normally; although the incident liquidated some accounts, forcing the order book up.

Bitfinex, a cryptocurrency exchange, is yet to issue a clear report, detailing precisely what happened. However, the rapid volume change could suggest that there could be more besides the official statement. There is also a chance that someone might have block-bought BTC, forcing volumes and prices higher.

The unexpected spike is when BTC spot prices rose by 2.5% on different platforms. The surge might be fueled by investors reacting to Western Alliance (WAL) and PacWest (PACW) stock prices falling by 30% as the American banking system faces a liquidity crunch.

Overall, the share prices of top regional banks in the United States remain under pressure, rapidly dropping as investors express fear of even more crises in the weeks and months ahead.

As of May 2, the BTC-PERP pair on Bitfinex had a 10% market depth of 110 BTC. As such, any order to buy 110 BTC would most likely shift the market by 10%. The market depth of a centralized exchange is used to measure liquidity.

Following the technical glitch, Bitfinex’s chief technology officer (CTO), Paolo Ardoino, said the unexpected spike was due to low liquidity.

Concerned users inquired if shorts would get liquidated even if they had no stop loss. Paolo assured them saying only shorts would be liquidated only when there are marked price changes.

Bitcoin is transitioning

The glitch happened days after Bitfinex said bitcoin’s volatility would taper.

The exchange’s analyst had described bitcoin‘s state as “transitional” , associating the current volatility to speculators trading using high leverage.

In their view, the coin’s volatility will fall as leverage traders are flushed out.

Coinglass data shows that bitcoin options’ open interests are down from $12.76b to  $11.48b in three weeks from Apr. 11, 2023.