Cryptocurrency markets are crashing and you may be asking why.
Update 2: Binance announces they have localized irregular trades and will reverse them. Funds are safe because of their alarm system.
Update: Binance announces all funds are safe. Irregularities in trading activity triggered automatic alarms. The investigation continues.
- Many user accounts on Binance have been compromised. Binance is one of crypto’s largest and highest volume exchanges. The compromised accounts executed trades at many times above market value for certain coins. Viacoin (VIA) specifically saw abnormal volume increases to over 9,675 BTC in a 24 hour period on Binance. For perspective, Ripple, crypto’s third highest market cap coin, (XRP) had a 24 hour BTC volume of 5,887 on Binance. VIA saw a temporary value increase of over 11,225% in just two minutes. Currently, it appears someone has taken control of users’ accounts that use API software (usually to allow trading bots to buy and sell) in order to execute over-valued trades and steal cryptocurrency from Binance users. Binance has temporarily frozen cryptocurrency withdrawals and we are still waiting for an official announcement on this issue.
- Rumors that Japan will penalize many of its exchanges can create uncertainty in the market. Japanese Yen makes up over half of the entire cryptocurrency market’s trading volume.
- In the past few months, now-bankrupt cryptocurrency exchange, Mt. Gox, has sold and liquidated about $405 million in Bitcoin (BTC) and BitcoinCash (BCH), possibly over-supplying the market and driving prices down. Billions of dollars of BTC and BCH still may be liquidated, pending approval of Japanese bankruptcy courts.
- Since February, the U.S. stock market has experienced a sharp decline in value. Although the crypto market only has a weak positive correlation with the U.S. stock market, it may continue to drive fear and uncertainty in the crypto market as well.
- The United States Securities Exchange Commission (SEC) announced that many crypto exchanges may be operating unlawfully by allowing trades in unregistered securities. The SEC is concerned that many crypto exchanges may appear as SEC-regulated when they are not. The announcement may create uncertainty for the future of exchanges operating in the U.S.