Crypto-market infrastructure creaks amid volatility test

As worries over the economic hit from the coronavirus outbreak spread from stocks, oil and bonds to cryptocurrencies late last week, bitcoin crashed to its worst day in seven years. But plummeting prices weren’t the only problem for investors.

Crypto-market infrastructure creaks amid volatility test Eikon

Crypto-market infrastructure creaks amid volatility test Eikon

As volatility and volumes spiked, the infrastructure underpinning digital coin trading creaked under the strain.
Futures exchanges saw a rash of electronically-triggered liquidations of leveraged positions, fuelling pressure on prices. Spreads between exchanges jumped. And at least two major exchanges went down, leaving investors locked out of the market for well over an hour.
Bitcoin prices collapsed nearly 40% on March 12, the biggest one-day drop since spring 2013, before jumping 16% a day later.
Volatility raced to its highest in seven years, with volumes across major cryptocurrency exchanges soaring to $30.8 billion on March 12-13, data from industry website CryptoCompare shows — among the four highest two-day totals on record.
As the turmoil gripped markets, New York exchange Gemini said it fell offline for less than 90 minutes. Seychelles-based BitMEX, one of the world’s biggest platforms for leveraged derivatives trading, went down twice, for a total of 45 minutes.
A spokeswoman for Gemini said the exchange “observed a technical issue impacting a subset of our customers.”
“In an abundance of caution, and to protect the integrity of our marketplace, we paused the market to resolve the issue and ensure all market services were back online in a healthy state prior to reopening,” she said.
Gemini declined to detail the problem, or comment on whether it was caused or exacerbated by market moves.
BitMEX said its outages were due to denial-of-service cyberattacks that stopped messages from reaching its trading engines. The unidentified attackers “waited for the moment their attack would make the most market impact” and overwhelmed the platform “during a moment of peak volatility”, it said.
The outages were a reminder of the fragility of key components in crypto markets, underscoring the dangers of a high-risk asset that large investors typically steer clear of.
And while most exchanges continued as normal during the turbulence, the Gemini and BitMEX episodes may also fuel doubts that bitcoin’s infrastructure is solid enough for it to work as an alternative to traditional currencies.
“There’s no way to say it’s good for the ecosystem when exchanges go down,” said Richard Galvin of crypto fund Digital Asset Capital Management.

https://www.reuters.com/article/us-health-coronavirus-cryptocurrencies/crypto-market-infrastructure-creaks-amid-volatility-test-idUSKBN2160SD

Crypto-market infrastructure creaks amid volatility test

Crypto-market infrastructure creaks amid volatility test

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