Bitcoin crash, what happened?

After the cryptocurrency was plunged over the weekend, it continued to be violently sold on Monday. Bitcoin fell nearly $54,000, with a 10% drop in the day, and Ethereum fell nearly $2,300, with a drop of over 13% in the day.

According to media analysis, this wave of selling seems to originate from a "time-triggered" algorithm program, which triggered selling orders at the same time in the past seven trading days (every day at 10 am EST, just after the opening of the US market). It is worth noting that this algorithm is still running over the weekend, which may lead to a wave of selling and shorting driven by high frequency trading (HFT), forcing leveraged long investors to admit defeat.

The data shows that the crypto "market maker" Jump Trading is liquidating hundreds of millions of dollars' positions, trying to aggressively re-price cryptocurrencies by selling and shorting billions of dollars' worth of cryptocurrencies in the most illiquid market period, while repeatedly eating and paying bills, ensuring the worst execution price.

Since August 3rd, the address marked by Jump Crypto, the cryptocurrency department of Jump Trading, has flowed in about $300 million, and the wallet of the trading company has flowed out about $80 million in the same period, which mainly flows to cryptocurrency exchanges such as Coinbase, Gate.io and Binance, and the capital flow continues.

It is worth mentioning that Jump Crypto faced legal proceedings for its participation in the collapse of TerraUSD and Terra ecosystem in May 2022. The US SEC is investigating Jump Crypto's alleged manipulation of TEDA currency prices, and the company and its CEO Kanav Kariya's alleged profit of about $1.3 billion.

Behind this liquidation panic, it is mainly driven by factors such as global stock market turmoil and geopolitical risks. The analysis points out that:

1. Last Friday, the US stock market plummeted, and the exchange rate of the US dollar against the Japanese yen plummeted. The market expected Japanese stocks to plummet after the opening on Monday. It is roughly estimated that on the basis of the 10% decline of the Shanghai Stock Exchange Index in the past two days, there may still be room for 6-8% decline. After the Bank of Japan's biggest recent policy mistake, Japanese stocks fell into a bear market in the past few days. This may force the Bank of Japan to start easing and cut interest rates again after a few days of slightly raising interest rates, and at this time, the Japanese economy may fall into contraction again.

2. The market is worried that the conflict between Iran and Israel may escalate. According to CCTV news reports, the Speaker of Iran's Parliament said on the 4th that Iran would respond strongly to this matter, and Israel and the United States would pay the price for Chana's attack and death. On the same day, the Israeli Defense Minister said that Israel was ready for the attack. The analysis pointed out that every time the conflict escalated, Bitcoin would plummet. It is expected that similar plunge will happen again when the next "conflict" is staged.

Risk warning and exemption clause

The market is risky and investment needs to be cautious. This paper does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, viewpoints or conclusions in this article are in line with their specific situation. Invest accordingly at your own risk.