Cryptocurrency Market Crash: Understanding the Sudden Decline of Altcoins on Binance
The recent cryptocurrency market crash, which occurred on October 10, has left many investors and traders stunned. The total market cap of cryptocurrencies plummeted by approximately $850 billion in just a few hours, with Bitcoin (BTC) experiencing a 10-15% decline. However, altcoins suffered a more significant blow, with some tokens traded on Binance briefly reaching zero. This phenomenon has raised concerns and questions among market participants, and it is essential to understand the underlying factors that contributed to this sudden decline.
Some of the altcoins that were affected by this crash include Cosmos (ATOM), IoTeX (IOTX), and Enjin (ENJ). These tokens, which had real market value on other centralized crypto exchanges, briefly fell to zero on Binance. In contrast, ATOM fell 53% on rival exchanges, while IOTX and ENJ fell 46% and 64.5%, respectively. This disparity in prices highlights the unique circumstances that occurred on Binance during the crash.
ATOM/USDT, IOTX/USDT, ENJ/USDT one-day chart on Binance. Source: TradingView
ATOM/USDT, IOTX/USDT, ENJ/USDT one-day chart comparison on multiple exchanges. Source: TradingView
Causes of the Altcoin Crash
The crash was triggered by a combination of factors, including the use of leverage (borrowed money) by traders on Binance. When prices began to fall, the exchange automatically sold altcoins that served as collateral to cover losses, leading to more selling pressure and a further decline in prices. This created a vicious cycle, which was exacerbated by the overload of Binance’s trading systems. Some users reported frozen accounts, missed stop losses, and delayed trades, which contributed to the chaos.
Crypto market overall liquidation chart. Source: CoinGlass
BitMEX co-founder Arthur Hayes noted that major exchanges, including Binance, were “liquidating collateral associated with cross-margin positions,” which worsened the selloff. Additionally, some analysts reported that market makers like Wintermute had withdrawn their funds from Binance due to delays, resulting in a lack of buy orders and the subsequent “zero” prices for some coins.
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Response from Binance and the Crypto Community
Binance co-founder Yi He (Chief Customer Service Officer) apologized for the issues experienced by users during the crash, stating that the exchange is committed to doing better. CEO Richard Teng also apologized and announced that Binance will compensate users with verifiable losses directly related to platform or system failures. However, losses due to price fluctuations or unrealized profits are not eligible for compensation.
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Crypto.com CEO has called for an investigation into exchanges following the $20 billion worth of liquidations. The crypto community is still reeling from the aftermath of the crash, and it is essential to understand the lessons learned from this event to prevent similar occurrences in the future.
This article does not contain any investment advice or recommendations. Every investment and trading activity involves risks, and readers should conduct their own research when making their decision. For more information on the cryptocurrency market and the recent crash, visit https://cointelegraph.com/news/why-did-some-altcoins-on-binance-crash-to-zero?utm_source=rss_feed&utm_medium=rss_category_market-analysis&utm_campaign=rss_partner_inbound
