On April 14, someone made a sales request for 2,500 bitcoin, for a value of approximately $ 212 million, in the Binance Order Book at $ 85,600, around 2-3% above Spot prices are operated at that time.
Seeing such a large order, the price of Bitcoin began to gravitate at this level around 5:00 p.m. UTC.
Suddenly, the order had disappeared, as seen with coin glass data, which caused a brief moment of market apathy when bulls and bears fought to fill a vacuum in liquidity.
However, the price of Bitcoin at that time was already in unstable terrain due to geopolitical concerns. Subsequently, he went down after the disappearance order caused chaos for merchants.
So what happened?
An answer could be an illegal technique that implies placing a large limit order to irritate commercial activity and then eliminate the order once the price is approaching to fill it. This is called “Order Spoofing”, defined by the Dodd-Frank Law of the United States 2010 as “the illegal practice of offering or offering the intention to cancel before execution.”
As seen on the liquidity heat map in the image above, on the surface, the order with a price of $ 85,600 looked like a key resistance area, so market prices began to gravitate towards it. However, in reality, that order and liquidity were probably falsified, which gives merchants the illusion of a stronger market.
The liquidity heat maps visualize an order book in an exchange and show how much an asset rest in the book at each price. Operators will use a heat map to identify support and resistance areas or even to aim and squeeze low pressure positions.
In this particular case, the merchant seemed to have made a possible parody order when the US capital market was generally closed, a period of low liquidity for the Bitcoin market 24/7. Then the order was eliminated when the US market was opened as the price moved to fill it. This could still have had the desired effect, since, for example, a large order in an exchange could stimulate merchants or algorithms in another exchange to eliminate their order, creating a vacuum in liquidity and subsequent volatility.
Another reason could be that the merchant who makes a sales order of $ 212 million in Binance wanted to create short -term sales pressure to fill in limit purchases, and then eliminated that order once those purchases were filled.
Both options are plausible, although still illegal.
‘Systemic vulnerability’
The former ECB analyst and current managing director of Oak Security, Dr. Jan Philipp, told Coindesk that manipulative commercial behavior is a “systemic vulnerability, especially in thin and unregulated markets.”
“These tactics provide sophisticated actors a consistent advantage over retail merchants. And unlike tradfi, where supplantation is explicitly illegal and monitored, there is cryptography in a gray area.”
He added that “the impersonation must be taken seriously as a threat, since it helped trigger the 2010 flash accident in traditional markets, which erased almost $ 1 billion in market value.”
Binance, meanwhile, insists that he is performing his part in the prevention of market manipulation.
“Maintaining a fair and tidy commercial environment is our top priority and invested in internal and external surveillance tools that continuously monitor trade in real time, marking inconsistencies or patterns that deviate from the normal behavior of the market,” said a spokesman for Binance to Coendesk, without directly addressing the case of the order of $ 212 million.
The spokesman added that if someone is manipulating the markets, it will freeze accounts, report suspicious activities to the regulators or eliminate the bad actors of their platform.
Cryptography and impersonation
Falsification, or a strategy that mimics a false order, is illegal, but for a young industry such as cryptography, history is full of such examples.
During 2014, when there was little or no regulatory supervision, most of the commercial volume took place in exchanges only of Bitcoins of retail merchants and cypherpunks, opening the industry to such practices.
During the 2017 phase, when the volume of commerce shot up, tactics were also expected such as the supplantation of impersonation, since the institutions were still skeptical about the kind of assets. In 2017 and 2018, merchants regularly placed nine -digit positions that had no intention of filling, just to withdraw the order shortly after.
The founder of Bitmex, Arthur Hayes, said in a 2017 blog post that “seemed incredible” that the supplantation was illegal. He argued that if an intelligent merchant wanted to buy $ 1 billion of BTC, he would weaken a sales order of $ 1 billion to complete it.
However, from the 2021 bullish market, the cryptographic market has experienced waves of institutional adoption, such as Coinbase (COIN) that is becoming public, the strategy (previously Microstrategy) in total in Bitcoin and the funds in negotiation (ETFs) in the stock market (ETF).
At the time of writing, there are no orders so great that they indicate more attempts for falsification, and the attempts of impersonation seem to have become less shameless. However, even with thousands of millions negotiated by Tradfi companies, there are still examples of this strategy in many cryptographic exchanges, particularly in low liquidity altcoins.
For example, last month, the exchange of cryptocurrencies Mexc announced that it had reigned in an increase in market manipulation. An internal investigation found a 60% increase in market manipulation attempts from the fourth quarter of 2024 to this first quarter of this year.
In February, a merchant manipulated the hyperlichid gelatin market by deceiving a price oracle, and Hyperliquid’s response to the activity found skepticism and a later capital output.
How do you fight the criptography market for falsification?
The load finally meets exchanges and regulators.
“Regulators should establish the baseline,” said Dr. Jan Philipp to Coindesk. ” [Regulators] You must define what counts as manipulation, specify penalties and describe how platforms should respond. “
Regulators have certainly tried to tighten such schemes. In 2020, the Pícaros merchant Avi Eisenberg was declared guilty of manipulating the decentralized exchange mango markets in 2022, but the cases have been few and distant.
However, encryption exchanges must also “intensify their surveillance systems” and use circuit switches while using more strict listing requirements to collect market handling, said Philipp.
“Retail users do not stay if they are still frontal, falsified and abandoned. If Crypto wants to overcome his casino phase, we need an infrastructure that rewards fair participation, not internal games,” Philipp concluded.
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