Crypto Black Thursday

In history, Black Thursday is referred to as a historical event in the world of finance that occurred on 24th October 1929, where panicked investors sent the Dow Jones Industrial Average plummeting 11%, from which the index could not recover for the next 25 years. This event triggered a subsequent market crash, also referred to as the Wall Street Crash.

Black Thursday was the catalyst that led the US economy into the Great Depression in the 1903s and triggered a complete revamp of how the U.S securities industry is regulated. In the crypto world, Black Thursday is also known as March 12th, 2020, which stimulated an unprecedented shift in the dynamics of Bitcoin investors.

Since Marth 12th, over 310,000 Bitcoin were moved for various cryptocurrency exchanges, with the main concentration being on three main exchanges: Bitfinex (126,845 BTC), Huobi (95,496 BTC), and BitMEX (95,438 BTC). The removal of data was amongst the longest consecutive runs ever of investors removing their assets from the exchange. The value of the 310,000 BTC that left the exchanges since March 12th is over $2.7 billion.

What was the reason for the decline?

During the early hours of the day on March 12th, Bitcoin was trading at $8000 before seeing a sharp price decline that leads the cryptocurrency to plunge to the lower $5000 region; however, the losses did not end there. Buyers were unable to absorb any of this pressure as the liquidation of these positions began cascading. Bitcoin’s price dropped to implausible lows of $3800, which caused BitMEX to cease trading and suggest that it was done due to a hardware issue.

The crypto Black Thursday was largely tied with the reason traditional financial markets across the world collapsed: terror caused by the COVID-19 pandemic, which caused the S&P 500 index to fall by 11% over the day, along with practically every other asset class. The leading factor for this severe collapse was the avalanche of liquidations in the exchanges, which is also known as a long squeeze.

A long squeeze happens when an asset’s price drops below traders’ stop-loss order which causes the long position to be sold and drives the spot price lower. Market makers who normally stabilize the market and provide liquidity were unable to save the situation. Due to this, many market makers and trader withdrew their limit orders or had to hold their positions through these troublesome times.

“Bitcoin has seen its largest prolonged withdrawal of funds from exchanges. According to our data, over 310,000 BTC have moved out of exchanges since Black Thursday. Largest outflows: Bitfinex: -126,845 BTC Huobi: -95,496 BTC BitMEX: -95,438 BTC,” – Glassnode

What is the future for Bitcoin?

Experts believe that two key factors drove investors to pull their BTC from crypto exchanges:

  • Firstly, it’s due to the fact that BitMEX has been largely deemed responsible for the price downturn, and this has led investors to distrust centralized entities and opt for cold wallets.
  • Another major reason for this could be because investors prefer to turn to long-term investment strategies as Bitcoin performs well during global financial turbulence.

The above could present Bitcoin with some stability and security, as lengthy transaction occasions and increasing charges may mean that investors are less likely to move their Bitcoin again into centralized exchanges.