Reviewing the terrifying night of August 18th Who pulled the trigger on the sniper targeting the longs? Which platform’s manipulation was the most obvious?

Author: Greg Cipolaro, Global Head of Research at NYDIG

Translation: WEEX Exchange


August 18 Review

On August 18, the price of Bitcoin plummeted rapidly, resulting in hundreds of millions of dollars in contract liquidation in a short period of time. Although it has been two weeks, considering the severity of the subsequent series of troubling issues, we believe it is necessary to review what happened at that time.


1) Bitcoin Falls Below $30,000

Looking back at August 18, the price trend unbelievably fell below $30,000 and remained below this level.

Prior to this, Bitcoin had surpassed the $30,000 mark twice, once in April after the regional banking crisis, and once in June after Blackrock submitted a spot ETF application. Unfortunately, the price failed to hold above $30,000. The first time it surpassed $30,000, it was suppressed by a series of regulatory enforcement actions, including the SEC’s lawsuits against Binance and Coinbase; the second time it broke through $30,000 took a little longer, but ultimately succumbed to profit-taking. Perhaps people gradually realized that although a spot ETF still had the possibility of approval, it would take a long time, and the price could not hold on for that long.

2) No Momentum Created by the Ripple Case

On July 13, the long-awaited ruling in the case between Ripple Labs and the SEC was announced. Ripple achieved partial victory, causing the prices of XRP and many other tokens to skyrocket. Bitcoin rose to a yearly high, but it was short-lived. Just as many altcoins were still rising, Bitcoin quickly fell back.

3) Difficult Season

We have discussed this topic several times recently, and it needs to be reiterated that the summer is usually a weak period for Bitcoin returns. The average monthly return rate generally starts to decline from May and does not pick up until October. Although the monthly returns for the entire summer of 2023 were a bit bumpy, it is clear that the seasonal impact is still at play.

Entering the summer decline in returns

4) Declining trading volume and volatility

We have noticed a trend this year of declining USD spot trading volume, which has continued in August. Although the month is not yet over, August is expected to be the weakest month in terms of spot trading volume so far. And this is happening against the backdrop of a Bitcoin price recovery – although Bitcoin may have already moved away from its high for the year, it has still risen by nearly 57% so far this year.

Spot trading volume continues to decline

The volatility measured by the implied volatility (IV) of at-the-money (ATM) options has also been on a downward trend over the past year. We believe that the decline in IV reflects both traders’ belief that Bitcoin will continue to maintain narrow fluctuations and the selling pressure from investors who hope to “earn” returns while continuing to hold the underlying assets (i.e., short-term traders engaging in range trading, as noted by WEEX).

Implied volatility of options continues to decline

5) Altcoins react in advance

This is not always the case, but it often happens, so it is worth mentioning that altcoins usually react in advance before Bitcoin’s movements. Altcoins have lower liquidity and higher risks, so they have greater volatility and faster reactions compared to BTC.

In mid-to-late August, some altcoins, especially the entire DeFi ecosystem, showed signs of weakness. Maker (MKR), Uniswap (UNI), Compound (COMP), Aave (AAVE), and others all dropped by 5%-9% on the day before the Bitcoin crash on August 18th. There was no fundamental news associated with this at the time, only rumors of a market maker exiting the market, perhaps indicating a precursor to weakness across various sectors, including DeFi.

6) Expectations regarding the Grayscale case ruling

This point surprised us, especially how expectations quickly formed based on incorrect analysis. On August 16th, the cryptocurrency Twitter community (commonly referred to as CT, should we now call it CX?) was anticipating the ruling of the Grayscale vs SEC case. Given the market’s very positive interpretation of Grayscale’s oral arguments on March 7th, some believed that at 11 am Eastern Time, the U.S. Circuit Court of Appeals for the District of Columbia would issue a ruling favorable to Grayscale, paving the way for Grayscale to convert GBTC into an ETF. Unfortunately, this ruling has not been made yet, and the market’s irrational expectations were not met.

WEEX Note: On the evening of August 29th, Singapore time, the DC Circuit Court of Appeals ruled in favor of Grayscale.

Plot breakdown

1) News of the day

Bitcoin was weak throughout the day, but the most severe selling occurred around 5:40 PM (Singapore time, August 18th). There were many news related to the selling, but none were directly related.

The closest one was an article published by The Wall Street Journal at 3:22 PM Eastern Time, which detailed the financial and operational status of SLianGuaiceX, a company that previously held Bitcoin. The second-to-last sentence of the article is quite cryptic, stating that SLianGuaiceX “wrote down the value of its Bitcoin holdings in 2021 and 2022 by $373 million and has sold them.” It is currently unclear when SLianGuaiceX sold its Bitcoin, but this article seems to indicate that it was at some point in the past. Tesla sold Bitcoin over a year ago but still retains 25% of its original position acquired in 2021.

Another news related to the selling occurred at 4:43 PM Eastern Time, when troubled Chinese real estate company Evergrande filed for bankruptcy protection under Chapter 15 of the U.S. Bankruptcy Code in New York. Evergrande’s only connection to the crypto market was a rumor in 2021 about Tether holding Evergrande debt (which has been debunked). Nonetheless, ongoing financial problems in China, including the aftermath of the real estate bubble (Evergrande’s bankruptcy may be one of its signs), could have a chain reaction on the digital asset market.

Digital assets have always been widely used in Asia, especially in China. Despite the ban on trading and mining in China two years ago, Binance’s monthly trading volume is still as high as $90 billion, according to recent reports from The Wall Street Journal. Therefore, if financial market pressures in China spread to the crypto market, it would not be surprising.

2) Binance traded at a lower price than Coinbase

Around 5:41 PM Eastern Time on August 17th, the price of Bitcoin started to fluctuate. Just a few minutes ago, the trading price of Bitcoin was around $27,500, but at the lowest point of the day, Coinbase’s spot price dropped to $25,234.

Binance fared even worse. We observed that, even taking into account the difference in USDT and USD quotes, Binance’s Bitcoin traded at a significant discount compared to Coinbase (Binance’s lowest spot price for BTC on August 18th was 25,166 USDT, while WEEX platform’s lowest price was 25,126.57, with the smallest spread).

Binance traded at a discount during the selling period

3) Surge in Long Liquidations

Although according to liquidation data, during the most intense period of adjustment, Binance’s spot price had a discount relative to Coinbase, the root cause of market pressure may be other trading platforms, not Binance.

Trading unregulated Bitcoin derivatives using leverage, whether they are futures contracts with daily, weekly, monthly, or quarterly expiration, or the more popular perpetual swaps with no expiration, is very popular, with trading volumes exceeding spot trading volumes by 3-4 times. Unfortunately, the liquidation of these derivative positions that exceed the margin is automatically conducted by the trading platforms, usually in a hasty manner and in a way that is unfavorable to the price, which often triggers a sharp drop in the price of the cryptocurrency.

Measured by futures and open interest (OI) of perpetual contracts, Binance is the largest unregulated derivatives exchange to date. In comparison, the largest regulated exchange CME has an OI of about 2 billion US dollars. Given this fact and the spot discount on the Binance platform, it is natural for people to blame the users of Binance exchange for the recent volatility.

Open Interest in Futures Contracts

However, by observing the amount of long liquidations (the automatic selling of long derivative positions by the exchange), a different story emerges, with traders on OKX, Deribit, and Huobi platforms being more likely to be the “culprits”.

Liquidation of Contracts

When we calculate the liquidation volume based on open interest (OI), the argument that other exchanges apart from Binance are responsible for the price drop becomes more apparent. Although CoinEx has a high OI, the $11 million worth of long liquidations is unlikely to have a significant impact on the market. On the other hand, Huobi, Deribit, and BitMEX are more pronounced.

Liquidation Volume of Open Interest

Future Considerations

Although we cannot draw conclusions yet, we believe that the most likely reason for the sell-off on 8ยท18 is that poor trading positions have put long positions in trouble. The relevant fundamental news is unlikely to be the cause of the sell-off, but it may add fuel to the already volatile situation.

Where are we now?

Bitcoin is currently below the 200-week moving average (WMA), a situation that has only occurred 10.7% of the time since 2015, and most of it happened in 2023. For those with a positive bias, this may be a unique buying opportunity. Others may see the 200 WMA as a short-term resistance level, especially given the recent poor performance of other risky assets such as stocks.

We recommend that investors closely monitor upcoming catalysts that may indicate the next direction of prices. There will be several milestones in the upcoming ETF process, as well as the solution to the Mt Gox bankruptcy case, which is expected to be announced on Halloween (October 31).

Spot ETF Application Tracking

Futures ETF Application Tracking

Of course, these are short-term market fluctuations. For long-term holders (e.g. 5 years), these factors may be just small bumps in the rearview mirror.

Bitcoin falls below the 200 WMA

Last Week’s Important News


  • JPMorgan: “Limited downside for the cryptocurrency market in the short term”

Regulation and Taxation:

  • Tornado Cash founder accused of money laundering and violating sanctions
  • FBI confirms North Korea stole cryptocurrency funds


  • Mastercard to terminate co-branded card partnership with Binance
  • WEEX Exchange launches deposit bonus program with no minimum participation unlocking up to $5,000
  • EDX Markets chooses Anchorage Digital as new clearinghouse custodian
  • WEEX Exchange introduces “Blood Compensation Plan”: I compensate for the liquidations in his account
  • Binance.US partners with cryptocurrency payment startup MoonLianGuaiy
  • After terminating partnership, Checkout.Com, Binance considers taking “legal action”
  • Binance faces legal risks in Russia

Recent Major Events

  • September 1 – Expected SEC response date for BlackRock iShares ETF
  • September 13 – Release of August CPI
  • September 22 – FOMC interest rate decision
  • September 29 – CME expiration
  • October 3 – Effective date for Valkyrie Bitcoin and Ethereum Strategy ETF
  • October 31 – Mt Gox claim payment date

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