Author: Bai Ye; Editor: Black Soil; Producer: Carbon Chain Value (ID: cc-value)

In April 2021, with the help of Coinbase's listing, Bitcoin reached a historical high, which can be described as "April's rose against a short wall." However, in the following May, we did not see the "pomegranate red like fire" as we wished. With the introduction of a series of regulatory measures, Bitcoin was hit hard instead.

On May 18, the Inner Mongolia Development and Reform Commission established a reporting platform for virtual currency “mining” companies; on the same day, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association issued the “Announcement on Preventing the Risk of Hype in Virtual Currency Transactions.” The result is obvious, Bitcoin, which is extremely sensitive to policy changes, reacts quickly -

On May 19th, Bitcoin experienced the most significant liquidity drop and price volatility since "Black Thursday" on March 12, 2020. The intraday price difference range was as high as $11,506 (as shown in the figure below, data source CoinGecko), which This dramatic downside price action has taken the entire market by surprise, especially as the plunge comes during the longest bull run in Bitcoin's history.

Soon, this sudden extreme market began to spread from Bitcoin, and the prices of other digital currencies including Dogecoin and Ethereum also plummeted. The entire digital currency market seemed to be in a state of panic. The sub-Bitcoin bull market may be coming to an end, or even revert to a long-term bear market structure. One day later, on May 20, the market panic and greed index reached 11, the degree of panic rose sharply, and the level was extreme panic. The data shows that after the sharp drop in the crypto market this time, the panic index has surpassed the panic index after the "Black Thursday" crash in March 2020.

first level title

01 Extreme market conditions test digital currency exchanges

Frankly speaking, the "May 19 Incident" caught many users and even some leading digital currency exchanges in the industry by surprise. According to the Downdetector platform, the downtime monitoring website, reports of outages surged after 5:45 a.m. on May 19th, Pacific time. Issues with exchanges have been reported across the United States and in several European countries including Austria, Czech Republic, France, Germany, the Netherlands, Portugal, Slovakia, Spain, Switzerland and the United Kingdom.

We analyzed the outages of the top five leading digital currency exchanges on "5.19" (data source CoinGecko, data extraction time June 6), the details are as follows:

In fact, the problems of digital currency exchanges on May 19 did not stop there. On that day:

• Binance Exchange announced the suspension of Ethereum and ERC-20 withdrawals;

• Coinbase Exchange also cannot operate normally in terms of login, asset balance checking and trading;

• Huobi, KuCoin and Gemini all announced the suspension of ERC-20 token withdrawals;

• Users of the encrypted asset bank Revolut reported that they were unable to purchase digital currency, and the app also had access interruption problems.

For the many cryptocurrency traders trying to get out before the market crashes or to buy on dips, such an exchange outage could have a huge impact.

But on the other hand, there are also some digital currency exchanges that have not been affected by the unexpected situation in the market. For example, Kraken and Gate.io have maintained normal operation, and Gate.io has undertaken a short period of time on May 19. The trading volume of the spot and contract markets exceeded 4 billion US dollars, and the trading volume of Kraken also surged. People can't help but ask: Why are there such huge differences between exchanges when they are also experiencing extreme market conditions?

first level title

02 What should digital currency exchanges do under extreme market conditions?

In fact, the downtime problem is just the tip of the iceberg in the extreme market. According to bybt, a cryptocurrency trading data platform, 880,000 people liquidated their positions during the crash on May 19, with a total liquidation amount of US$9.3 billion. The largest single liquidation order occurred on the Huobi platform. up to $67 million. However, people found that under the extreme market conditions of "5.19", the attitudes and performances of digital currency exchanges were different—some digital currency exchanges chose to "lay flat" and rarely or even almost did not deploy any extremes. The market response measures are to allow the explosion data to soar; some digital currency exchanges refuse to "lay flat" and block risks for users, allowing users to have time and space to execute trading decisions, ensuring that users' trading decisions are fairly realized.

When there is a "black swan" in the market, some digital currency exchanges, out of consideration of protecting the platform, are understandable in their first reaction to safeguard their own interests, but this approach is actually very unfriendly to users. On the contrary, some digital currency exchanges choose to stand with users and their interests at the first time without hesitation. Take Gate.io as an example. The first decision to "extend the deposit increase and repayment time" was made to help users recharge the deposit smoothly. During the "5.19" period, the platform provided transaction support for thousands of users and extended the deposit increase and repayment time17 Within an hour, nearly 60 million US dollars in losses were recovered for users.

Although some exchanges have "suffered losses" under extreme market conditions, the so-called adversity sees the truth. People suddenly discovered that only those digital currency exchanges that can cope with emergencies and dare to share risks are the most worthy investors and traders. trustworthy. The eyes of the masses are discerning, and those who pay will be rewarded. We found that after experiencing "5.19", Gate.io has become the head of a small number of open interest (7-day) indicators showing an upward trend One of the digital currency exchanges. (As shown in the figure below, the source of the data is not a small account, and the data extraction time was June 6)

first level title

03 Summary

The exchange is an important part of the ecological development of digital currency. Today, everyone knows this very well. The core job of the exchange is to ensure that every transaction can be processed safely and efficiently, and at the same time adopt the best measures Protect the interests of investors and traders.

Half a month has passed since the "5.19" incident. At present, the entire digital currency market seems to have entered a relatively stable consolidation stage. The price of Bitcoin basically fluctuates sideways in the range of 35,000 US dollars, and the market value remains at 700 billion US dollars. Left and right (as shown in the picture below, the picture is from CoinGecko, extracted on June 6, 2021).

However, it should be noted that although the market seems to be stabilizing, every practitioner cannot heal the scars and forget the pain, and must constantly reflect and learn from extreme market events. You know, since the birth of Bitcoin, the cryptocurrency market has easily seen a sudden surge in price followed by a rapid plunge, such as:

• In 2013, the price of Bitcoin plummeted after reaching $1,000 for the first time;

• In early 2018, the cryptocurrency industry entered a prolonged bear market after the ICO bubble burst;

• On "Black Thursday" on March 12, 2020, the price of Bitcoin fell from a high to $3,000.

The past two weeks have indeed been very difficult, and it may be difficult for many people to understand how the digital currency market is like this? First of all, to be clear, Bitcoin will not rise forever. From Elon Musk's funny remarks to excessive leverage trading, a series of events have combined to cause the price to plummet. However, unlike the previous "false prosperity" in the digital currency market, some encryption projects are now actively building infrastructure, and many decentralized financial protocols have also made great leaps. It can be said that "digital currency" is no longer an abstract bet on the future, but an innovative technology that can actually be applied in reality. This technology is real and more exciting than ever before. Therefore, the fundamentals still maintain a state of steady development.

For us, what is important is how to learn from the "5.19" plunge.

Presumably, after all this experience, we can learn at least one thing: volatility is inherently part of the digital currency industry. In this reality, investors and traders must choose trading venues carefully. Only digital currency exchanges that put users first during extreme market fluctuations are industry leaders and users' first choice.