This morning, the crypto community watched in amazement at an unexpected, huge spike in the bitcoin (BTC) price on Binance.US, the US arm of Binance. Bitcoin’s value skyrocketed to an astronomical $138,000 in a flash, a jump of nearly 450% from its average value at the time, which hovered around $29,000.
Bitcoin explodes on Binance.US
This unprecedented peak, which lasted only a few seconds, occurred this morning at 08:50 Dutch time. The value quickly corrected and dropped back to levels comparable to other crypto exchanges.
This extreme move probably doesn’t seem like the result of a single trader willing to pay such a high price for his bitcoin. Rather, it was caused by low liquidity for the BTC/USDT trading pair on Binance.US. When the demand is too high and the supply is too low, strange things can happen on a trading platform.
Market data also shows that a $400,000 BTC purchase on this trading pair can push prices up by 2%, while the same effect would require at least $842,000 on a BTC/USD trading pair. Without extremely low liquidity, you let the bitcoin rate so don’t just rise above $100,000.
The impact of market liquidity on BTC
Market depth is an indication of the liquidity in a financial market. According to a recent study by Kaiko, the market depth of Binance.US is by as much as down 76% compared to May, suggesting that both market makers and traders have pulled out of the platform and liquidity has plummeted as a result.
Of course, this has everything to do with the charge of the American Securities and Exchange Commission (SEC) to Binance.US. The US regulator accuses the exchange of operating without a license in the country and of violating securities laws. This caused many investors to pack their bags, resulting in a serious drop in market depth.
Despite this serious charge, bitcoin continues to show its resilience. After struggling for a while, the BTC price rose again yesterday and today with a nice 8% to $29,000a record since early May.