Bitcoin Skyrockets to $138,000 on Binance.US: A Sign of Liquidity Woes

• Binance.US temporarily displayed Bitcoin price at an astounding $138,000, approximately 400% higher than global spot prices.
• Binance.US’s trading data revealed 62.22 Bitcoin were traded during the brief price surge, reflecting an anomaly possibly due to low liquidity levels.

As a global cryptocurrency exchange, Binance.US has recently been facing scrutiny from market watchdogs. The platform was once again spotlighted when Bitcoin (BTC) prices against Tether (USDT) momentarily surged to a staggering $138,000 – almost quadruple the typical spot prices displayed elsewhere.

The unexpected price hike lasted a fleeting few seconds, as shown by TradingView data scrutinized by Blockworks. A reported transaction of 62.22 BTC, equivalent to nearly $1.8 million at prevailing rates, took place within this small window of time. This dramatic upswing is speculated to be a result of someone market purchasing Bitcoin with USDT. If accurate, this would mean the scant liquidity prompted all available sale orders to be filled at market rates. Consequently, only extremely high ‘joke bids’ remained, sending Bitcoin’s price soaring to unprecedented highs.

Instances of this nature are more commonly witnessed in reverse, known as ‘flash crashes.’ Binance.US experienced such a phenomenon in October 2021 when Bitcoin prices plummeted 87% from $65,000 to $8,200 before quickly rebounding. Binance.US attributed this to a faulty trading algorithm.

Moreover, Coinbase Pro saw the price of Ether drop from $100 to $13 in December 2018, only to bounce back within minutes. Binance.US has faced liquidity issues recently due to difficulties with its banking partners amidst regulatory challenges. Last month, traders were observed paying premiums of over 3% on Bitcoin and similar amounts for Ether (ETH) compared to competing platforms. Analysts likewise suggest that these price disparities resulted from liquidity problems.

On another front, Binance.US, Binance Holdings Ltd., and CEO Changpeng Zhao’s legal team have accused the U.S. Securities and Exchange Commission (SEC) of releasing “misleading” information and violating the “applicable rules of conduct.” The lawyers dispute a statement by SEC Enforcement Director Gurbir Grewal, suggesting that Zhao and Binance have free rein to “commingle customer assets or divert customer assets as they please.”

The lawyers argue that the SEC’s press release was intended to cause market confusion, potentially damaging Binance.US customers and unduly influencing the jury. The motion is part of an ongoing lawsuit that the SEC filed against Binance, Binance.US, and Zhao on June 5, accusing them of offering unregistered securities and not registering Binance as an exchange or a broker-dealer clearing agency.