Crypto Market also affected as top 10 coins by market cap drop over the past hour and 24 hours, but stability returns as Bitcoin regains trading over $29,000.
Bitcoin, the world's largest cryptocurrency by market cap, took a sharp dive on Wednesday, dropping by 7% in just an hour to $27,230. The sudden plunge was reportedly triggered by an alert from blockchain analytics firm Arkham, which said that wallets linked to the defunct crypto exchange Mt. Gox and the U.S. government had moved significant amounts of Bitcoin.
However, the alert turned out to be the result of a "bug fix" on Arkham's system, which caused previously configured alerts to be triggered erroneously. The company later revised its findings, stating that the alerts were sent accurately in this case and that no one received inaccurate alerts.
Despite the clarification, the wider crypto market crashed alongside Bitcoin, with the top 10 coins by market cap all down over the past hour and 24 hours, barring stablecoins. Ethereum also dropped in tandem with Bitcoin, reaching just under $1,785.
The news of the wallet movements had created concerns among crypto investors, who feared that a large sell-off by Mt. Gox or the U.S. government could trigger a market-wide downturn. However, Arkham CEO Miguel Morel clarified that the wallet movements weren't connected and that the U.S. wasn't necessarily the one moving or selling assets related to Mt. Gox.
It is worth noting that the sudden dip in the price of Bitcoin occurred between 19:17 and 20:01 UTC, while the alert and subsequent tweet from Arkham were sent afterwards at 20:07 UTC and 20:08 UTC, respectively. Therefore, the alerts and tweets could not have caused the sharp BTC price drop that day.
The derivatives market was severely impacted by the steep drop in prices, which occurred rapidly and without warning. As a result, crypto market participants have experienced more than $255 million in liquidations thus far, with nearly $100 million attributed to Bitcoin traders alone.
In conclusion, while the erroneous alert from Arkham caused some initial panic in the crypto markets, the subsequent clarification and revised findings have helped to ease concerns among investors. The incident also highlights the need for greater transparency and accuracy in crypto market data, as even small errors can have a significant impact on the market.