- Binance.US mistakenly displayed the bitcoin price in its tether (USDT) market as over $138,000, nearly 400% higher than the prevailing spot prices seen on other platforms.
- During that time, Binance.US recorded a trading volume of 62.22 BTC.
Binance’s US is facing regulatory scrutiny and encountering difficulties in maintaining the functionality of its major bitcoin (BTC) order books. On Tuesday evening, Binance.US mistakenly displayed the bitcoin price in its tether (USDT) market as over $138,000, nearly 400% higher than the prevailing spot prices seen on other platforms. As shown in a screenshot shared by Bitcoin Jack before falling to around $28,000.
BTC/USDT Chart, Courtesy: @BTC_JackSparrow
According to the exchange’s data, the rapid price increase lasted only briefly. During that time, Binance.US recorded a trading volume of 62.22 BTC, equivalent to approximately $1.8 million based on current prices. Interestingly, during this temporary surge, other trading pairs for bitcoin remained unaffected and continued to trade as usual.
The significant and sudden surge implies that an individual purchased that quantity of bitcoin using USDT through a market order. Due to limited liquidity, all available sell orders were immediately executed at realistic prices, leaving only exaggerated “joke bids” in the order book. As a result, the price of Bitcoin skyrocketed to reach new all-time highs. The unusual price spike is believed to have occurred due to the lack of liquidity in the bitcoin-tether trading pair on Binance.US rather than attributed to any intentional trading activity.
Analysis of market depth data reveals that a bitcoin purchase of $400,000 on this particular pair can lead to a 2% price increase, whereas a minimum of $842,000 would be required to have the same impact on a bitcoin/USD trade pair. This discrepancy in liquidity levels sheds light on the peculiar nature of the price movement.
Examining Binance.US’s Historical Incidents
Sudden price drops are typical in instances like these., commonly known as “flash crashes.” Binance.US experienced such an incident in October 2021, when the price of bitcoin plummeted by 87%, from $65,000 to $8,200, before swiftly recovering. The exchange attributed this event to a malfunctioning trading algorithm. Similarly, in December 2018, the price of ether on Coinbase Pro plummeted from $100 to $13, only to rebound within minutes.
Regardless of the specific circumstances, Binance.US has been grappling with inadequate liquidity for a while, compounded by challenges with its banking partners amidst regulatory concerns. In the previous month, traders experienced premiums exceeding 3% for Bitcoin and similar amounts for ether compared to other platforms.
Analysts have also pointed to liquidity issues as the cause of these price disparities. Fortunately, liquidity conditions have improved, resulting in the elimination of those premiums.
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Binance.US Files Lawsuit, Accusing SEC of Issuing Misleading Statements
In other news, lawyers representing Binance.US, Binance Holdings Limited, and CEO Changpeng “CZ” Zhao have submitted a motion to the US District Court for the District of Columbia. The motion alleges that the United States Securities and Exchange Commission (SEC) provided misleading statements regarding an ongoing securities lawsuit.
According to the lawyers, the SEC’s statements have led to the belief that the SEC has misled the public about the case. Legal representatives of Binance.US, Binance Holdings Limited, and CEO Changpeng “CZ” Zhao recently filed the motion. The motion claims that the recent press release by the US Securities and Exchange Commission (SEC) contained unsupported statements and was inconsistent with professional conduct rules. The legal team asserts that the SEC’s statements in the press release lack evidence and fail to adhere to recognized standards of professional conduct.
According to Gurbir S. Grewal, Director of the SEC’s Division of Enforcement,
“Given that Changpeng Zhao and Binance have control of the platforms’ customers’ assets and have been able to commingle customer assets or divert customer assets as they please, as we have alleged, these prohibitions are essential to protecting investor assets.”
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However, the lawsuit counters the SEC’s claims by emphasizing the lack of evidence regarding the exchange’s involvement in commingling or diverting customer assets. It challenges the assertions made by the SEC by highlighting the absence of supporting evidence in this regard.
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