Skip to content
UTXOHub
12 March 2020 · Markets

What happened on Black Thursday?

UTXOHub · Bitcoin's history

On 12 March 2020, as fear of COVID-19 crashed markets worldwide, bitcoin's price fell from around $7,300 to $3,867 in about 16 hours by CoinDesk's Bitcoin Price Index, with the low at around 02:15 UTC on 13 March. Forced selling on derivatives exchanges such as BitMEX made the fall worse, and bitcoin was back above $10,000 by early May 2020.

12 Sept 2019 – 10 Sept 2020 · Week of 12 Mar 2020: $5,415High $11,757

How far the price fell

Bitcoin fell in two steps. Around 10:45 UTC on 12 March it dropped from $7,200 to $5,678 in 15 minutes, CoinDesk reported. That night it fell again, from $5,800 at 23:00 UTC to about $3,900 at 02:15 UTC on 13 March, by Coin Metrics' figures. CoinDesk's Bitcoin Price Index put the low at $3,867 at around 02:15 UTC, the lowest since 25 March 2019, and CoinDesk wrote that bitcoin “plummeted by nearly 39 percent on Thursday”. Coin Metrics called the day's fall “nearly 50%”. The figures differ because each exchange and index records its own prices.

Why it fell

Bitcoin fell during a worldwide sell-off caused by the spread of COVID-19. The same day, the Dow Jones Industrial Average, a measure of big US companies' shares, “finished down 2,350 points, or 10%”, and the S&P 500 fell 9.5%, Reuters reported. It was the Dow's worst day since the “Black Monday” crash of October 1987. Reuters said investors had “mounting recession fears due to the coronavirus”, and that President Donald Trump's ban on travel from Europe, announced the night before, set off the selling. CoinDesk described bitcoin's fall as part of the same “relentless coronavirus-led sell-off in risk assets”.

Forced selling on BitMEX

Many traders had borrowed to bet on a rising price, using contracts that follow bitcoin. If the price falls far enough, the exchange closes the bet by selling: a liquidation. On BitMEX, a large exchange for these contracts, the morning drop forced liquidations worth $702 million, according to the research firm Skew, as quoted by CoinDesk. By 06:00 UTC on 13 March about $1.1 billion of such bets had been liquidated there, and the forced selling pushed the price lower, Coin Metrics found. At 02:16 UTC on 13 March, trading on BitMEX “slowed to a crawl” during what was later found to be an “intentional DDOS attack”, a flood of junk traffic. Coin Metrics wrote that “as soon as BitMEX was attacked, the price recovered and surged to $5,300.”

Fees, the mempool and MakerDAO

Traders rushed to move coins on and off exchanges, so more people wanted space in each blockBlockA batch of transactions added to Bitcoin's shared record, about every 10 minutes on average.. The fee rateFee rate (sat/vB)The fee a payment offers for each unit of block space, in satoshis per virtual byte. Miners can evaluate related transactions together. for a confirmation within 10 to 20 minutes rose from 27 to 70 satoshisSatoshi (sat)The smallest unit of bitcoin: one hundred-millionth of a bitcoin. 100,000,000 sats make 1 BTC. per byte in a few hours, and median fees in dollars rose almost five-fold, Coin Metrics found. Bitcoin's fees “remained elevated for two weeks”. The mempoolMempoolThe waiting room for Bitcoin transactions that have been sent but aren't in a block yet., the queue of transactions waiting for a block, reached about 35 MB on 13 March, its highest that week, by Satoshi.info's data (Cointelegraph). On Ethereum, where traffic also jammed, the crash pushed many loans on the lending system MakerDAO below their safety limits, and some of the collateral was won in auctions with bids of 0 DAI, Maker's dollar token. That left over $4 million of debt unbacked, The Block reported.

How the price recovered

By the morning of 13 March bitcoin was back near $5,415, CoinDesk reported. On 8 May 2020, in early trading in Asia, it rose to $10,015, its first time above $10,000 since 24 February, Bloomberg reported. Three days later the halvingHalvingEvery 210,000 blocks, about every four years, the new bitcoin created in each block is cut in half. came at block 630,000. On 16 December 2020 bitcoin passed $20,000 for the first time, reaching $20,893 in New York, and Bloomberg noted it had “almost tripled in 2020”. That report put the March crash at a 25% loss, a smaller figure than CoinDesk's or Coin Metrics'.

Bitcoin's history

References

  1. CoinDesk, “Bitcoin's Crash Triggers Over $700M in Liquidations on BitMEX”, 12 March 2020.
  2. Coin Metrics, “Coin Metrics' State of the Network: Issue 43 - The BitMEX Liquidation Spiral”, 24 March 2020.
  3. CoinDesk, “Bitcoin Price Briefly Dips to 12-Month Low in Overnight Trading”, 13 March 2020.
  4. Coin Metrics, “Coin Metrics' State of the Network: Issue 47 - Assessing the Long-Term Fallout from Crypto's Black Thursday”, 21 April 2020.
  5. Reuters, via Business Day, “Dow suffers worst one-day loss since 1987”, 13 March 2020.
  6. Cointelegraph, “Bitcoin Mempool Briefly Drops to Zero on Blockchain.com”, 13 March 2020.
  7. The Block, “In a first, MakerDAO protocol to auction MKR tokens to cover $4M bad debt”, 12 March 2020.
  8. Bloomberg, via Daily Maverick, “Bitcoin Tops $10,000 for First Time Since February Pre-Halving”, 8 May 2020.
  9. Bloomberg, via Business Day, “Bitcoin breaks above $20,000 for the first time in price milestone”, 16 December 2020.