Bitcoin (BTC) experienced an episode of extreme volatility on the Binance exchange on Christmas night, when its price in the BTC/USD1 trading pair plummeted to $24,000, before rising back above $88,000 today.
USD1 is the stablecoin backed by the US dollar and issued by World Liberty Financialan entity linked to the business environment of the president of the United States, Donald Trump, and his family.
These fluctuations usually originate from limited liquidity rather than a general change in trend. In digital asset markets, new pairs often lack enough market makers to maintain tight prices.
Under these conditions, a single large market sell-off, liquidation, or targeted automated trade through the pair can wipe out bids quickly.
Debates between manipulation and liquidity
Not all observers agree that it was a random technical error. Some, like the decentralized finance (DeFi) analyst whose pseudonym is CryptoNobler, hold that It is a coordinated manipulation.
«The informants [insiders] they have become totally short [shorts]they quickly lowered the price to $24,000, liquidated their long positions and ran away with the profits,” the analyst said. According to your perspective, the event represented “pure coordinated manipulation during the low liquidity hours on Christmas night”.
In contrast, Catherine Chan, head of business development at Solv Protocol, assures that bitcoin didn’t crash to $24,000 on Binance organically. It was a liquidity event, Chan maintained. According to their analysis, “this was because Binance and USD1 launched a deposit promotion with a fixed 20 percent annual return.”
During the promotion period, users who subscribe to USD1 flexible products will be able to enjoy up to 20% annual return rate, which includes exclusive bonuses in addition to real-time rewards, explained the Binance platform in its official statement.
USD1 operates on Binance, the exchange with the highest trading volume globally since last March, where it increasingly enables new trading pairs with USD1, as reported by CriptoNoticias.
Arbitration restored normality
Chan explains that the incentive caused an imbalance in the market. “Many users exchanged USDT for USD1, bringing the latter coin to a 0.39% premium, which is huge for a stablecoin,” he said.
“Smart investors borrowed $1 in lending protocols against their bitcoin holdings. “They deposited the asset directly or sold it slowly for cash to satisfy demand,” the specialist explained.
The fall would have originated when a trader decided to execute a massive exit in an inefficient mannerChan said.
«The problem is that this pair has very little liquidity. That market order wiped out most of the buy orders, briefly causing a very low price. The arbitrage bots bought it again instantly,” he concluded, underlining that there have been no fundamental changes or mass liquidations.
Chan’s words were supported by Changpeng Zhao, former CEO of Binance, who sought to dispel doubts about the integrity of the exchange.
“This shows that Binance is not involved in the operations,” Zhao said. “Low liquidity in the new pairs means that a large market order can skyrocket prices, but this was quickly corrected by arbitrageurs. No liquidations occurred, since this pair is not included in any index,” he added to calm users about possible forced closures of positions in other markets.