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Black Thursday anniversary: Can crypto markets see another huge crash?

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It is no secret that March 12, 2020, marked one of the darkest days in crypto history. This was the day when Bitcoin (BTC) witnessed one of the largest single-day price dips in its decade-long existence, swooping from $8,000 to a staggering low of $3,600, albeit briefly, just for a matter of minutes.

To put things into perspective, within a span of just 24 hours, over $1 billion worth of BTC longs were liquidated, causing one of the most intense value drops witnessed by the digital market in its brief history. Another way to look at the crash is that during the above-stated time frame, BTC lost nearly 50% of its value, a statistic that is quite striking, to say the least.

Also worth noting is the fact that over the course of the same week, Bitcoin and many other cryptocurrencies exhibited an extremely high correlation with the United States stock market, which at the time was seen as a possibility due to the overall drop in investor appetite for high-risk assets, especially as the COVID-19 pandemic was just beginning to rear its ugly head.

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The steep correction in the U.S. stock market — which saw the Dow Jones Industrial Average dip by 2,300 points — was its worst decline in over 30 years. This correction, coupled with a lack in demand for BTC, resulted in the cryptocurrency’s price first dropping first to around the $5,000 mark and then to around $3,600.

Is another crash incoming?

To explore the possibility of whether the crypto sector may be on the receiving end of another massive dip sometime this month, Cointelegraph reached out to CryptoYoda, an independent analyst and cryptocurrency expert. In his view, the triangular combination of finite supply, ever-growing demand and highly leveraged trading is a recipe for flash crashes and turbulent volatility, adding:

“We will continue to see many temporary crashes along the way, as markets have a way to regulate and balance the intense emotions in both retail and institutional investors and traders. It is just that we never witnessed an experiment on such a tremendous scale involving limited supply in combination with insane demand and explosive tools like leverage that will make this ride rather bumpy.”

Hunter Merghart, head of U.S. operations for cryptocurrency exchange Bitstamp, pointed out that even though the structure of the crypto market has evolved dramatically since last March, the possibility of another crash cannot be ruled out entirely. That being said, he stated that the crypto industry is now full of regulated spot trading avenues, derivatives platforms that ensure a high level of liquidity.

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Furthermore, Merghart believes that when compared to previous years, there are now many more active participants within the global crypto landscape who can help ease out any imbalances if volatility were to suddenly increase overnight for some unforeseen reasons.

Anshul Dhir, co-founder and chief operating officer for EasyFi Network — a layer-two DeFi lending protocol for digital assets — pointed out to Cointelegraph that currently, an immense amount of capital has been locked in decentralized finance, and the overall market cap of the crypto industry is more than $1.5 trillion. However, of this figure, Dhir pointed out that the majority of positions are over-leveraged even to the tune of 50x.

Things are different this time around, really different

While some fears of a possible crypto crash do exist, by and large, the sentiment surrounding the crypto space seems to be much calmer this time around. For example, Chad Steinglass, head of trading for U.S.-based crypto trading platform CrossTower, believes that even though the one-year anniversary of the much dreaded “bottom” is coming up, there is nothing to worry about in regard to such a scenario repeating itself again:

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“While March of 2020 was a dark time for crypto as it was for all global markets in all assets, it is what came right after that has come to define digital assets. The swift and massive Fed intervention to support liquidity in financial markets was exactly the activity that Nakomoto saw as the writing on the wall after the Great Financial Crisis of 2008 that prompted him (or her) to create Bitcoin in the first place.”

He further opined that the Federal Reserve’s response to COVID-19 was the confirmation of the original thesis behind Bitcoin, and it kicked off the bull run that has been ongoing for the last 11 months. Steinglass said that the Fed has shown no signs of tightening its monetary policy, and even Congress, despite partisan gridlock, has shown that it will continue to inject stimulus into the economy until the recession brought on by the coronavirus is fully in the rear-view mirror.

Furthermore, with the steady flow of institutional adoption — with a new major traditional asset player announcing its support for digital assets seemingly every other week — it appears as though there will be no serious correction for any reason other than some surprise prohibitive regulations coming from the Treasury or the Securities and Exchange Commission, which, at this point, seems highly unlikely.

The only caveat that Steinglass has in relation to his otherwise bullish stance is the possibility of some profit-taking from the U.S.-based investors who may have bought BTC at the bottom and have been waiting to sell until the calendar rolls over for tax purposes. “However, I expect that the volume of BTC that these sellers will look to unload is relatively small in the grand scheme of things,” he added.

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Daniele Bernardi, founder of PHI Token and Diaman Group, believes that last year’s Bitcoin price drop and the collapse of financial markets all over the world were totally related to the onset of the pandemic. In this regard, he told Cointelegraph that it’s unlikely that such an event will happen again:

“Any asset, even gold and commodities, suffered a big drop due to the uncertainty in the development and spread of the pandemic. So, in my view, the movement of Bitcoin was more related to irrational and emotional selling of everything by investors, an effect well known as ‘systematic risk’ rather than Bitcoin itself.”

Safe to hold?

Though the events of March 12 are etched in everyone’s memory at this point, most technical indicators seem to suggest that the possibility of such a scenario playing out once again seems improbable.

In this vein, it is also worth mentioning that many of the coronavirus fears that were running rampant this time last year — and appear to be the primary drivers of the crash — have now largely died out, especially with vaccinations starting to be rolled out on a global scale.

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If there is one thing that the crypto market has taught its participants over the years, then anything is possible when it comes to this niche. Therefore, any prediction of future price action is nothing more than a very well-educated guess and that any unforeseen global event may reshuffle Bitcoin’s deck to form a completely differentive.

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Binance

Binance’s Trading Volume Hits $100 Billion in Just One Day

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Binance continues to see unprecedent trading activity while attempting to sail through regulatory hurdles

Binance’s daily volume hit an eye-popping $100 billion on Oct. 20, according to a tweet by CEO Changpeng Zhao.

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The leading crypto exchange recorded this crucial milestone on the day Bitcoin, the largest cryptocurrency, reached a new all-time high of $67,276.

Despite introducing stricter measures for users due to severe regulatory scrutiny, Binance enjoys a comfortable lead over other crypto exchanges in both spot and derivatives trading, according to data provided by CoinMarketCap.

Eerier this month, the trading platform also announced a $1 billion ecosystem fund.         

Meanwhile, the decentralized finance sector is catching up with centralized behemoths. The total value locked in DeFi protocols has hit $100 billion for the first time.

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Crypto Exchange

Binance Smart Chain DeFi protocol PancakeHunny suffers flash loan attack

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As the users argue “what’s better,” Ethereum or Binance Smart Chain, the latter saw another decentralized protocol being exploited. PancakeHunny on BSC was attacked by a flashloan and no, this wasn’t a first for the protocol.

Blockchain security and data analytics company Peckshield Inc. announced the attack on Twitter.

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The last time that this protocol was exploited, was in June, wherein the team had noted the creation of a smart contract to exploit the Hunny Minter Smart Contract. The contract was subsequently executed 91 times, as per the team.

The team took a long time to respond to the hack this time but assured the users that their funds were safe. The team added in a preliminary report,

“On 20 October 2021, at 0920 UTC. A smart contract was created to exploit the Hunny TUSD vault. The Contract was subsequently executed 26 times.”

PeckShield provided some details about the same noting,

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According to the agency, this hack was possible due to a profit inflation bug, which converts the relatively small amount of harvested ALPACA, to a large amount of TUSD for staking. PeckShield added,

“These converted TUSDs are then counted as profit, now inflated to mint large amount of $HUNNY!”

Source: Twitter

Actions taken by the team

The PancakeHunny team has stopped the minting process for the TUSD vault while assuring that funds in Hives were all SAFE. The exploit did not affect other Hives and Vaults but the price of HUNNY.

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They added that the issue has been identified and the team will change its rooting to higher liquidity pools to prevent the aftereffects of price manipulation of LP pools.

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Coinbase

NBA Makes Coinbase Its Exclusive Crypto Partner

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Coinbase has joined FTX in scoring major partnerships in the sports industry     

The National Basketball Association has announced a multi-year deal with Coinbase, America’s biggest crypto trading platform in an Oct. 19 press release.   

Coinbase will act as the exclusive partner of the NBA, NBA G League, Women’s National Basketball Association (WNBA), and other leagues. 

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As part of the deal, the exchange will have a brand presence during televised games as well as unique content and activations that are meant to boost crypto awareness.  

Kate Rouch, Coinbase’s chief marketing officer, says that the company is proud of joining forces with the NBA:

The freedom to participate and benefit from the things you believe in is at the heart of Coinbase’s mission.  Nobody believes this more than NBA and WNBA fans. We’re proud to become the Leagues’ official cryptocurrency partner.

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The shares of Coinbase are up roughly 3% at press time. 

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