Bitcoin Dips to $24,000 on Binance Due to Market Glitch: CZ Clarifies

Changpeng "CZ" Zhao, CEO of Binance, addressed concerns following the circulation of a screenshot showing Bitcoin priced at approximately $24,111 on Binance. He clarified that this was due to a microstructure glitch involving a thin, newly listed BTC/USD1 pair, not a market-wide crash. "The exchange itself is not involved in trades," CZ stated.

Was Bitcoin's Drop to $24,000 Genuine?

The sudden dip was confined to the BTC/USD1 pair, quoted in USD1, a stablecoin from World Liberty Financial. The pair quickly corrected to align with Bitcoin's market price above $87,000, according to data shared by traders.

CZ explained that on an illiquid order book, a single aggressive order can cause a price spike, which is soon corrected by arbitrage. "This shows the exchange is not involved in trades. Low liquidity on new pairs can lead to price spikes, but arbitrageurs quickly corrected it. No liquidations occurred, as this pair isn't included in any index," he added.

Catherine Chan, Head of Business Development at Solv Protocol, described the event as a "liquidity event," not a Bitcoin crash. She connected the incident to a Binance and USD1 promotion offering a 20% fixed APY deposit deal that led users to convert USDT into USD1, briefly inflating its value.

"Many users swapped USDT for USD1, pushing it to a 0.39% premium, significant for a stablecoin. Some borrowed USD1 to deposit or sell it slowly to meet demand. Someone opted to sell via BTC/USD1, but due to thin liquidity, it caused a low price," Chan explained.

"Arbitrage bots quickly corrected it," she noted. "No fundamental changes occurred. No mass liquidations."

Some users speculated on social media about the event, suggesting it was a coordinated signal. However, CZ emphasized that the quick arbitrage response and lack of liquidations indicate the exchange wasn't setting a market-wide price.

For traders, the key takeaway is the potential fragility of new quote-asset pairs. Promotions that drive rapid flow into a single stablecoin can leave order books thin, making them susceptible to price fluctuations from large orders.

At the time of writing, Bitcoin was trading at $89,298.

Featured image created with DALL.E, chart from TradingView.com.