Market Lab Report - Update on bitcoin and ethereum selloff

Published:

11 Jan 2021 14:12 ET

The spot market sell off in bitcoin started around $38k. The major exchange Coinbase partially failed as a consequence of the heavy selling. It failed to registed buys causing the price of bitcoin to fall $350 lower than other exchanges. This pulled down the index price that futures exchanges use to calculate leverage funding, wrecking bearish havoc on speculative markets.

Unlike previous crashes in the past 2 years, where over-leveraged markets lead by trader liquidation, this one started on spot markets, then was greatly amplified by Coinbase partially failing. Coinbase then did not turn itself off for the good of the ecosystem. Coinbase has been plagued with outage issues and now a mispricing issue since it launched. Meanwhile, decentralized exchanges such as uniswap never encounter such issues. U.S. citizens can also trade on such exchanges, unlike most major centralized exchanges which prohibit customers from the U.S. due to onerous regulations.

It is likely the Coinbase issue exaggerated the selloff thus odds favor that the corrections in bitcoin of -28.0% and ethereum of -32.5% have probably run their course.

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