Bitcoin Surges 4% as Crypto Exchange BitMEX Initiates Maintenance

Over the past 12 hours, the Bitcoin price has increased by more than 4 percent, rising from $6,400 to $6,700 within a short period of time.

Analysts have attributed the abrupt increase in the price of Bitcoin to the temporary downtime of BitMEX, a crypto exchange widely recognized for its margin trading system that enables users to trade Bitcoin and Ethereum with leverage against the US dollar.

As investors could not log into BitMEX and alter their trade orders, analysts stated that Bitcoin short contracts, which achieved a new monthly high on August 21, were liquidated, pushing the price of Bitcoin up 4 percent.

BitMEX Situation

On August 19, the BitMEX cautioned its users regarding a system maintenance that was planned to be held on August 21. The maintenance was executed as previously planned and the system was down briefly for a couple of hours, disallowing traders from logging into the platform and executing trades.

BitMEX postponed the resumption of its system for several minutes, after some users reported difficulty logging in. Apart from the minor hiccup in the logging in process, the maintenance was executed properly, without major delays.

“Some users are reporting difficulty in logging in. We are diagnosing. We have postponed resumption of trading for 5 minutes to 01:35. We will report back shortly,” BitMEX said on August 21, following up with a short update, “Trading resumption deferred until login is stable. We will report back shortly. Login has stabilized. We encountered a large DDoS upon restarting web services. We will resume trading at 02:00 UTC (in 7 minutes).”

Within hours, the BitMEX trading platform was restored and it resumed its normal operations, enabling traders to execute trades and orders.

But, analysts have said that the surge in the price of Bitcoin demonstrated manipulation in the market by large-scale retail traders that took advantage of the downtime of BitMEX, a period in which investors can no longer short the market, to drive up the price of Bitcoin.

Alex Kruger, a cryptocurrency trader and trading analyst at large FX market maker, said that the BTC price surge on August 22 has shown the concerns of the US Securities and Exchange Commission (SEC) regarding market manipulation.

“The BTC lightning +7% breakout during Bitmex’s downtime shows why odds of SEC approving the CBOE bitcoin ETF proposal should be close to zero. Even if no manipulation (that’s debatable) this stresses the importance of BitMEX, a fully unregulated market with 40% market share,” Kruger said.

Last month, the US SEC disapproved the exchange-traded fund (ETF) application filed by the Winklevoss twins, citing an issue with the ETF’s dependance on Gemini, a US-based cryptocurrency exchange, as the main source of price.

Market Needs to Mature

For the crypto market to mature, it will need some stability in the market and if it can be affected by minor events like a scheduled maintenance of BitMEX, then the market is still clearly at its infancy, which may decrease the probability of an ETF or any public instrument being approved.

Featured image from Shutterstock. Charts from TradingView.

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Author: Joseph Young

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