In an unusual turn of events, Bitcoin’s price momentarily dropped to approximately $24,111 on Binance, igniting a flurry of reactions across social media platforms. Changpeng “CZ” Zhao, the exchange’s founder, quickly addressed the fallout, attributing the phenomenon to a microstructure glitch fueled by the thin liquidity surrounding a newly listed BTC/USD1 pair rather than a catastrophic market crash.
Did Bitcoin Really Crash?
The fleeting drop was seemingly confined to the BTC/USD1 market, which references USD1, a stablecoin introduced by World Liberty Financial, a company backed by the Trump family. In a matter of seconds, prices rebounded to align more closely with the prevailing Bitcoin rates, which hovered above $87,000, as highlighted by the traders who circulated the initial screenshot.
CZ’s breakdown of the situation was clear: when trading on an illiquid order book, a single aggressive order can create an extreme price movement before the mechanisms of arbitrage work to close the gap. He emphasized, “This actually shows the exchange is NOT involved in trades. Low liquidity on new pairs means one large market order can spike prices, but arbitrageurs quickly corrected it. No liquidations occurred, as this pair isn’t included in any index.”
Catherine Chan, Head of Business Development at Solv Protocol, supported CZ’s perspective, describing the incident as a “liquidity event” rather than a symptom of a Bitcoin collapse. She connected the dislocation to a promotion by Binance regarding USD1, which offered a 20% fixed APY deposit deal that, she asserted, incentivized users to convert USDT into USD1, momentarily pushing USD1 to a significant premium.
Chan explained further, “Many users switched from USDT to USD1, escalating USD1 to a 0.39% premium—quite substantial for a stablecoin. Savvy investors borrowed USD1 through @lista_dao, using it against SolvBTC or SolvBTC-BTCB smart lending markets with an approximately 0.5% APY. They either deposited USD1 directly or sold it slowly in the spot market to accommodate demand. Then someone decided to execute a market order via BTC/USD1. The downside? This pair has very thin liquidity, and that order wiped out most buy orders, yielding a brief but drastic price drop.”
According to her analysis, “Arbitrage bots swiftly reversed the prices back, indicating that no fundamental changes occurred and no widespread liquidations took place.” As whispers of conspiracy and market manipulation rippled through online communities, one user voiced a concern framing the event as a deliberate signal, suggesting a nefarious intent from CZ and the Trump family regarding the future of cryptocurrencies.
In contrast, CZ’s explanatory approach underscores that the rapid reactions of arbitragers, linked with the absence of any cascading liquidations, highlighted that this sudden drop did not reflect a realized market-wide price shift.
For traders, this incident serves as a crucial reminder: new trading pairs can be structurally delicate, and promotional campaigns that rapidly funnel market activities into a singular stablecoin have the potential to create exceptionally thin order books. In such environments, a solitary market order can generate headlines before establishing a broader trend.
As of the latest updates, Bitcoin is now trading at $89,298.
