Group Co.
A Tale of Two Selloffs
Traders Magazine Online News, November 21, 2018
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness … it was the season of Darkness, it was the spring of hope, it was the winter of despair…”
– Charles Dickens, A Tale of Two Cities
Over the past week, we have endured not one, but two brutal selloffs in crypto assets, causing depression among the crypto community and schadenfreude among its many critics. These moves were quite different from each other however, despite being of similar magnitudes with the same elevated trading volumes.
Using CoinRoutes data and software tools, we were able to analyze both moves and show that the first fall, which took place on the 14th of November, was likely triggered by a small number of large sellers, likely originating in the OTC market, while the second, which took place on the 19th, was much broader, more orderly, and likely originated on exchange markets.
Selloff #1: November 14th
To start the analysis let’s look at the chart of the key 12 hour period on the 14th: (This graphic shows the CoinRoutes Consolidated Best Bid and Offer for Bitcoin-US Dollars all the exchanges that accept US clients and trade directly in US Dollars. It also employed CoinRoutes size filter to only include bids and offers that were for at least 5 Bitcoin in order to exclude de-minimus quotes.
This move featured a large & sudden price drop that lasted just over 30 minutes, followed by several hours of significant volatility. Ultimately, the market made a bottom at around 5400 in Bitcoin-US dollars that lasted for several days. It is particularly noteworthy that, for the entire 12 hour period in the above graphic, the best bid was higher than the best offer by over 25 basis points. That is shown in the top pie-chart as “Large” crossed situations and it represents opportunities for arbitrageurs to profit from the differences between exchanges. Another noteworthy statistic is the fact that LMAX, despite a relatively low market share overall, was represented on the best offer almost 20% of the period. As LMAX’s strategy is to aggregate market maker liquidity, this statistic makes it relatively likely that OTC trades left the market makers long bitcoin, with a need to sell during the fall. To dig deeper into this, we zoomed in on the chart to the time-period with the steepest drop:
For more information on related topics, visit the following channels:
Comments (0)