Token Price Collapses 50% on Binance, Triggering Market-Wide Speculation

Binance, one of the most popular cryptocurrency exchanges in the world, lost more than 50% of its value in just a few minutes. Many traders and analysts were puzzled by the sudden drop and even tried to pinpoint the culprit.

Basically, the crash focused on two big-name tokens — Act I, the Prophecy (ACT), DeXe (DEXE) and dForce (DF) — and it was only a matter of time before values crashed. Within just a few minutes, ACT lost 50% of its value, while DEXE suffered 30% of its value and DF 20%. This isn’t just a case of Binance, or even just their exchange. These tokens traded for the same amount on several other centralized and decentralized exchanges. These aren’t just small-scale selloffs: The bitcoin markets are interconnected.

The “sudden outburst” is believed to have been caused by what Binance said at 10: 30 UTC: The binary options trading exchange said that there will be changes to the leverage requirements and margin tiers for perpetual contracts — including the ACT/USDT trading pair. And unlike with previous updates, which should have given traders time to adjust their positions, this change has been retroactive to current open trades. That’s probably enough to cause many traders (or even some automatic trading systems) to literally liquidate their contracts and unleash a flurry of sell orders.

At the same time, there was an explosion of liquidations which added to the volatility in perpetual contracts, and the price fluctuations spread into spot markets where low liquidity and massive sell orders led to a perfect storm (observers noted that these trades were executed very quickly).

The response of the mainstream crypto community has been quick. Natural Gas Traders X (formerly Twitter) Users have taken to the social media platform to express their confusion and frustration with the crash. Andrei Grachev, an analyst at DWF Labs, said that either a hack or some other market manipulation probably caused the disaster, but that the main culprit in the crash was Binance’s sudden changes to its margin rules. People believe that by “nuking” positions on leveraged exchanges, the virtual currency went under and exploded.

Technical analysts said that complex trading techniques like cross-margin setups and arbitrage might have compounded the crisis. As traders screamed to get their positions retracted in response to falling prices, panic set in on global markets, with automated trading bots and human traders selling assets to cover losses.

More ominous was the assumption, suggested by some analysts, that a bot who misconfigured the market-making engine on which the markets were made, exacerbated the sell-off. No empirical evidence has indicated that this is the case.

The fallout from this event has raised questions about Binance’s handling of leverage updates and its responsibility as a leading exchange. Critics argue that implementing such significant changes without warning undermines trust in the platform. One prominent user on X accused Binance of acting recklessly by closing large positions at market prices without providing traders with a grace period.

With the global market still reeling from the news, there have been a few bellwethers taking a stand to help. DWF Labs announced they’re partnering with affected projects to set aside funds for buybacks and recovery strategies. While ACT has fallen 46% so far this week, DEXE has dropped 22% and DF has shrunk 20% over the past 24 hours.

In many ways, this shows both the risks of leveraged trading and the fragility of crypto markets during periods of low liquidity. As you wait for answers to what led to this crash, traders are currently grappling with huge losses, yet wonder not only what could have been done differently in this case but also how to prevent similar crashes like this in the future.

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