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Several altcoins crashed in minutes on Binance on Tuesday despite quiet market conditions.
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Some have pointed to an exchange update as the cause of the turbulence, but questions remain.
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Localized flash crashes are nothing new in crypto.
While cryptocurrency market participants have been bracing for volatility all week, users of the largest cryptocurrency exchange by volume, Binance, were still caught off guard when several altcoins crashed on the exchange, costing at least one trader seven figures.
Is an exchange update to blame?
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On Tuesday, several altcoins saw significant price declines in minutes on Binance despite relatively quiet market conditions. The most notable of them, a popular Solana memecoin, Act 1 The Prophecy, or ACT, tanked as much as 52% in 30 minutes from $0.1897 to $0.0904 and, albeit at a slower pace, is still falling at the time of writing on Wednesday, trading at $0.0588.
Besides ACT, DEXE, the token for DeXe, a decentralized autonomous organization, also fell about 35% in 45 minutes, though, unlike ACT, it has recouped some of its initial losses at the time of writing.
Other tokens that recorded significant losses include BANANAS31, HIPPO, KAVA, LUMIA, QUICK, and TST.
Amid the chaos, at least one trader has suffered significant losses. Prominent crypto smart money tracker Lookonchain highlighted CoinGlass data showing that a whale was liquidated for $3.79 million as the price of ACT hit $0.1877.
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Many, including Lookonchain, have attributed the recent incident to an update to Binance’s leverage trading platform, sparking outrage from users. Specifically, on Tuesday, the exchange tweaked the leverage and margin tiers for several pairs, including 1000SATSUSDT, ACTUSDT, PNUTUSDT, NEOUSDT, NEOUSDC, TURBOUSDT, and MEWUSDT.
But the explanation that this update was the problem raises the question of why only ACT was affected in this list and why other tokens like DEXE were impacted.
Binance, for its part, has released the findings of a preliminary investigation, stating, “there were no market anomalies during the adjustments.” The exchange did, however, highlight large ACT spot sell orders on the platform around the time that may have sparked volatility under low liquidity conditions.
According to the exchange, three VIP accounts sold ACT tokens worth approximately 514,000 USDT, while one non-VIP account sold 540,000 USDT worth of the token. Still, the exchange dispelled any notion of a coordinated effort to drive down the price of the token by asserting that no single account made significant profits from the incident.
Localized flash crashes like this are nothing new in crypto.
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In October, BGB, the native token of the cryptocurrency exchange Bitget, experienced an isolated flash crash that caused it to lose 50% of its value in 15 minutes. This forced the exchange to promise full compensation for any losses.
In March 2024, Bitcoin crashed 87% on BitMEX from over $67,000 to $8,900, but the exchange maintained that the turbulence did not impact its derivatives trading platform.
At the height of the 2021 bull market, Binance.US, the U.S. arm of the Binance exchange, experienced a similar incident, with Bitcoin crashing 88% to $8,200.
These incidents highlight the need for robust liquidity while raising questions about the stability and reliability of these cryptocurrency exchange platforms.
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This article Is A Binance Update To Blame For A Crash In Several Altcoins That Triggered A $3.8M Loss For At Least 1 Trader? originally appeared on Benzinga.com
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