One of the main reasons for the collapse of the Bitcoin exchange rate to $3,800 on March 13 was the mass liquidation of the positions of traders, Coinbase said in its official blog. Its analysts are confident that customers at various sites used high margin leverage, the forced closure of which provoked a cascading drop in asset prices. This is noted by RBC agency.
The experts write that behind the collapse of the Bitcoin exchange rate are the same factors that caused a decline in the stock market. Short-term speculators sold assets, this caused a decline in their price. Institutional investors needed money to secure margin positions, some of which were forcibly closed. But the value of Bitcoin fell more than it did in traditional markets, for one main reason: the size and volume of leverage.
According to them, in the stock market, the marginal leverage is often limited by a factor of 2-3x. In the crypto industry, the situation is different, some exchanges provide leverage of up to 100x, the company specified. They explained that in this case, a change in the price of an asset by 1% in a direction unfavorable for the trader will lead to the complete liquidation of his position.
Analysts added that usually a sharp fall in the asset rate is followed by a sharp increase in demand. However, on March 13, the opposite happened, the more the Bitcoin price fell, the more it pushed investors to sell their coin reserves, experts emphasized.
From their point of view, the departure of the BitMEX derivatives exchange for maintenance helped to stop the wave-like depreciation of the first cryptocurrency and other digital coins. On it, Bitcoin during the recession was trading significantly lower than on other platforms, but the situation stabilized after the suspension of trading, Coinbase experts explained.
On March 12-13, the Bitcoin rate fell by more than 50% during the day. As a result of this, traders lost about $5.8 billion in crypto. In total, the positions of 235 thousand users were eliminated at various sites, the loss of one of them amounted to more than $70 million per transaction.