The March 12 crypto crash was one of the most violent in the history of the crypto space, with the price of Bitcoin (BTC) declining from $8,000 to as low as $3,850 in less than a day. Further, at two different points during March 12 the price of Bitcoin (BTC) fell thousands of dollars within an hour as can be seen in the below chart.
Hourly Bitcoin (BTC) price chart centered on March 12 courtesy of TradingView.com
Now a report from the University of Sussex titled ‘No place to hide: How market manipulation in the age of pandemic is destroying traditional safe havens’ indicates that the severe crypto crash of March 12 was actually part of a larger globally coordinated effort to devalue safe haven assets. Apparently the purpose of this unprecedented market manipulation was to ensure that investors would keep their funds in USD denominated assets instead of transferring funds into safe haven assets like gold and Bitcoin (BTC).
Manipulation Bots On BitMEX Induced The March 12 Crypto Crash
First off, this report found that the insane crypto selling on March 12 was not due to actual investors dumping. Rather, manipulation bots on BitMEX were largely responsible for the crash.
Indeed, the crash halted and Bitcoin (BTC) bottomed out only when BitMEX went down for ‘maintenance’. Apparently, if BitMEX didn’t shut off then a massive cascading margin call would have continued to run out of control until it wiped out BitMEX’s order book and order books across the rest of the crypto space.
Integrating this new information from the University of Sussex, perhaps BitMEX simply weeded out the manipulation bots during the one hour of maintenance, which would explain why Bitcoin (BTC) quickly rebounded.
Gold Simultaneously Attacked Via Massive Short On COMEX Gold Futures
In any case, the report finds that unprecedented market manipulation was simultaneously happening elsewhere across global financial markets. For example, when the S&P 500 crashed in March, Gold should have had its best week ever, since typically gold has a -40% correlation with the S&P 500, meaning gold rallies when stocks crash.
However, gold unexpectedly had its worst week in 8 years instead of rallying, and it appears this was due to a massive short on COMEX gold futures.
Zooming out, it seems there was a globally coordinated effort to devalue safe haven assets like gold and crypto, and that this devaluation of safe haven assets was done in order to prevent holders of USD denominated assets like stocks, bonds, etc. from being enticed to invest in gold and Bitcoin (BTC).
Gold And Bitcoin Really Are Safe Haven Assets After All
Notably, logic suggested that Bitcoin (BTC) and gold would rally if the stock market crashed. When the stock market finally did crash and gold and Bitcoin (BTC) crashed as well, the general belief was that the theory that Bitcoin (BTC) and gold are safe haven assets does not apply if the economy is extremely bad.
However, it is now clear that the original logic that Bitcoin (BTC) and gold are safe haven assets is correct, and an unprecedented globally coordinated market manipulation effort was the only reason that gold and Bitcoin (BTC) crashed instead of rallying.
Unfortunately This Looks Like It Will Be A Persistent Problem For Bitcoin
The question remains, who is behind this global market manipulation? It is quite logical that major holders of USD denominated stocks and bonds could be behind this, since the devaluation of safe haven assets serves to sustain the value of their USD denominated portfolios. Theoretically, it is also possible that the government could be behind this market manipulation, since it could be considered just another tool for ‘stimulating the economy’.
Regardless of who exactly is behind the attacks on safe haven assets, the unfortunate truth is that gold and Bitcoin (BTC) are likely to be attacked again if the stock market crashes. The University of Sussex notes that usually regulators would prevent this sort of activity, but regulators are so overwhelmed that even large-scale market manipulation ‘slips’ under their radar.
Also, in general the forces behind this global market manipulation will undoubtedly be constantly suppressing the price of Bitcoin (BTC), since a major Bitcoin (BTC) rally at any time, regardless of whether the economy is bullish or bearish, could cause large outflows of funds from USD denominated assets.
Thus, there are extremely wealthy and powerful entities that want to keep Bitcoin (BTC) down in order to protect USD denominated assets, and it appears this will result in a serious headwind for the Bitcoin (BTC) market long term.
On a final note, this anti-Bitcoin (BTC) market manipulation has actually been going on for years, starting with the launch of the Chicago Mercantile Exchange (CME) Bitcoin Futures in December 2017 which instantly collapsed the price of Bitcoin. Indeed, Bitcoin still has not returned to the all-time high of $20,000 that it achieved before the launch of the CME Bitcoin Futures, likely due to big players from the traditional finance world aggressively manipulating the crypto market.