Bitcoin trades for $40k again, Buy the dip or wait a bit?

The Bitcoin flash crash we witnessed earlier this week was one for the history books, or so they say. In all of 2023, we had not seen a single flash crash of more than 7.5% in a matter of hours. And all this while we are still trading around the $40k level.

That means billions of dollars changed hands in a matter of minutes.

Banking crisis

Even during the (minor) banking crisis we had in the spring of this year, Bitcoin fell ‘only’ 6% in one day. And in August we also saw a sell-off, when Bitcoin fell 7% (on some platforms even 9%). Of course, the largest digital coin was trading around $25k at the time, so volume and money being traded was far lower than now.

Bitcoin “flash crash?”

Fell $2,000 in minutes.

No idea why. Working to find out. pic.twitter.com/A0ULdiFVai

— Brian Sullivan (@SullyCNBC) August 17, 2023

By now, we are once again at $40k levels, hence moves of 7% in just a few hours are tough to take for smaller ‘day traders’. Is this the era when Wall Street firms agree with each other when to buy and sell Bitcoin?

That’s what it seems like according to many crypto fans. And if so, does that mean now is a good time to buy the dip or should we wait until Wall Street signals that it wants to start another big rally.

Trading bots

Flash crashes that are characterized by very large price movements are nothing new for crypto. Classic American stock exchanges have also seen this phenomenon in recent years. Ever since computers and trading bots entered the trading floor, volumes and movements changed pace very quickly.

:youtube[86g4_w4j3jU]

The most famous and largest to date caused the Dow Jones to fall as much as 1,000 points in a matter of minutes on May 6, 2010 (during the European banking crisis). Jim Cramer, who is very well known among crypto fans, didn’t know what to say as it happened. In the video you see the CNBC journalists’ jaws drop after the Dow loses billions of dollars in a matter of minutes and then climbs back up very quickly as if nothing happened.

2020

Bitcoin also has a history of flash crashes. One particularly notable one happened in early May 2020, when crypto whales began liquidating their Bitcoin positions in $2 million dollar blocks just as the clock struck 5 p.m. in California.

Bitcoin crashed 15% in just 7 minutes that day, but still managed to end the year with a phenomenal gain.

In other words, the flash crash we witnessed this week, is quite ‘normal’ in comparison