The reason for the sudden drop in Bitcoin's price to $24,111 on Binance on December 24 has been revealed.
On Christmas Eve, the price of BTC against the USD1 stablecoin (USD1) more than tripled, but soon returned to a level consistent with trading pairs with other dollar-denominated stablecoins. Those lucky enough to buy BTC during the dump made a killing when they sold their coins after the asset's price recovered.
Bitcoin Price Collapse
The CEO of the cryptocurrency service Solv Protocol, under the pseudonym "Catherine is Solving," attributed the abnormal fluctuations in Bitcoin's price to a promotion launched on Binance, which allowed exchange users to lock up USD1 at 20% annual interest. Upon learning of this offer, many traders began exchanging BTC for these stablecoins, opening market orders rather than limit orders, and due to low liquidity, Bitcoin's price plummeted.
This incident proves that Binance isn't involved in trading operations. "The low liquidity observed in new trading pairs means that even a single large market order can significantly impact the price, but it will quickly correct thanks to arbitrage traders," Binance founder Changpeng Zhao commented.