Bitcoin tumbled 9 percent in a half-hour on Tuesday, sending prices to the lowest in three months, in a rapid selloff even by the tumultuous standards of the cryptocurrency markets.
As of 21:50, BTC was trading around $8,600, down from a high of $9,812 over the previous 24 hours.
“Even for bitcoin, this is a pretty rare event,” said Qiao Wang, director of product at Messari, a New York-based cryptocurrency-focused data and research firm.
The price started to plunge around 18:30 UTC and stabilized around 19:00.
A trader, who wished to remain anonymous, said the price drop may have been exacerbated by margin calls and contract liquidations on Bitmex, a Seychelles-based exchange that provides customers with 100x leverage, essentially loans to traders that multiply the size of an investment by 100 times.
The margin calls were noted by DataMish, a data platform. We contacted Bitmex for comment but were unable to reach a representative at press time.
The long squeeze
A long squeeze, the opposite to a short squeeze, is a situation in which investors who hold long positions feel the need to sell into a falling market to cut their losses. This pressure to sell usually leads to a further decline in market prices.
Data from Bitfinex also shows long positions falling below -0.005 percent after BTC’s rapid price decline forced investors to close out their long positions beginning Midday UTC on Sept. 24 after prices dipped below $9,700.
While there are some investors who refute data from Bitfinex, due to low numbers and unactionable data, open interest with Bitmex’s futures market also took a hit, leading to less than enthusiastic expectations for a quick recovery in BTC’s price.
Prices hit $8,627 at time of publishing.