Guy from Coin Bureau on today’s flash crash.

Disclaimer: The following reflection was sent by Coin Bureau’s Guy on his telegram channel regarding today’s flash crash.

TL:DR - leverage not only recks you, but recks the market as a whole.

Here goes;

“Hey Guys,

So, we had a strong flash crash. This on the day that Bitcoin was officially made the legal tender in El Salvador.

This may have caught many people off guard, but I can't say that I am completely shocked.

As I mentioned in my video from Sunday (referenced above), highly leveraged Bitcoin markets make these small corrections that much more violent.

In this case, there may have been some profit taking by whales. They bought the El Salvador rumour and sold on the "news".

However, there is no reason that a bit of profit taking by these whales should have led to a 10% fall in Bitcoin and other alts.

The reason that it did this was thanks to liquidations caused by leverage. In the past 12 hours we have had over $3.4 Bilions in positions liquidated.

As I pointed out in my video on leverage, this was more than likely to have been smaller retail traders who were long BTC in anticipation of a rally post El Salvador

The moment that the liquidation engines started, they further drove down the mark price on the futures instruments, and the price fell even further. This spiral continued all the way down to the $45k level we saw.

The sad reality of these liquidations is that they were all forced sales. Even if you wanted to hodl Bitcoin at $45k, if your futures position deteriorated to the bankruptcy price, you were liquidated.

The liquidations were so precipitous that they caused numerous exchanges to go down. This therefore meant that even if some of these traders wanted to login and adjust their positions, they couldn’t do much.

If you avoided leverage, then you would still have that crypto.

And already, after this flash crash it seems as if some people have been buying the dip in the spot market. The price bounced from $45k to $47k just as quickly.

I do hope that as the crypto markets become more mature, they grow less susceptible to these market shocks...”