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Binance founder Changpeng Zhao (CZ) commented on the short-lived sharp price movement in the BTC/USD1 trading pair.
CZ stated that this phenomenon, known as a “flash crash” in the cryptocurrency market, was caused by momentary price fluctuations due to large market orders placed in a low-liquidity trading pair, and that no liquidation occurred during the event.
Regarding the background of the process, Catherine, Head of Business Development at Solv Protocol, stated that Binance’s 20% annual fixed-rate deposit campaign for USD1 temporarily affected market balance. Following the campaign, many users converted USDT to USD1, which briefly pushed the USD1 price up by approximately 0.39%. Subsequently, some users borrowed USD1 through the Lista DAO lending market using SolvBTC or SolvBTC-BTCB as collateral, and then gradually sold these funds on the spot market to meet demand.
During this process, it was noted that some investors sold BTC directly via market orders in the BTC/USD1 pair, but due to the extremely low liquidity of the pair, a single large order quickly exhausted the buy side, causing the BTC price to drop sharply for a very short period. It was added that the price drop was quickly recovered with the intervention of arbitrage bots, and levels returned to normal.
In his statement, CZ argued that the incident was not related to any direction or intervention by the exchange. He stated that large market orders in new trading pairs with low liquidity can lead to such sudden price movements, adding that arbitrageurs quickly closed the price gaps and that, because the pair in question was not included in any index, it did not trigger chain liquidations.
*This is not investment advice.