Bitcoin, after surging higher this week, has suffered a flash crash, losing around $1,500 from its price in matter of minutes.
The bitcoin price broke $12,000 per bitcoin on the Luxembourg-based Bitstamp exchange early Sunday morning only to plummet 12% to $10,500 within the hour.
The bitcoin price has now bounced back, somewhat pulling the wider cryptocurrency market with it, to trade at around $11,300—but not before more than $1 billion of bitcoin positions were liquidated across various crypto exchanges.
“In the past 24 hours, 72,422 people were liquidated,” bitcoin and crypto market data provider Bybt said via Twitter, adding the largest single liquidation order, worth $10 million, occurred on the Seychelles-based exchange Bitmex, known for its high leveraged trading volume.
Leveraged trading allows traders to take larger positions with smaller amounts of capital, with the number of bitcoin and cryptocurrency exchanges offering high leveraged trading exploding over recent years. Traders take positions, effectively bets, on where they expect prices to be when their position “closes”—losing their capital if the market goes against them.
This week’s bitcoin price rally has attracted a surge of retail traders to the market, with many bitcoin exchanges reporting year-to-date trading highs as eager investors attempted to catch the upswing.
The cause of the bitcoin flash crash was not immediately clear, however some speculated it could have been caused by so-called “whales” who control large amounts of bitcoin and other cryptocurrencies moving the market. The market is more easily pushed around by whales when trading volumes are lower, such as early on Sunday morning.
“Whales playing,” finance writer and commentator Frances Coppola asked via Twitter.
The sudden move in the bitcoin price, which caused over $20 billion worth of value to be wiped from the combined market capitalization of the world’s cryptocurrencies according to CoinMarketCap data, was watched with combination of shock and awe by the bitcoin and cryptocurrency community.
“Bitcoin is the most ruthless asset in the world,” bitcoin and crypto investor Anthony Pompliano said via Twitter.
“[Bitcoin] hits $12,000 and then drops $1,500 in minutes. Not for the faint of heart.”