Did Margin Trading Crash the Price of Bitcoin?

Pete Rizzo Coin Desk August 16, 2014

The price of bitcoin declined to its lowest level since May yesterday, falling nearly 10% and ending what had been a long period of relative optimism and stability for the global bitcoin market.

But while there were many theories as to what news events could have caused bitcoin’s value to fall into such a steep decline, some market observers believe that this most recent movement may have been caused not by external factors, but by the actions of bitcoin traders.

This theory, perhaps most notably posed by Raffael Danielli, posits that out-of-control margin trading caused a flash crash in at least one major bitcoin exchange market, a development that had a cascading effect across the larger bitcoin market.

In the post on his quantitative analysis blog Matlab Trading, Danielli asserts that margin traders, specifically those on Hong Kong-based bitcoin trading platform Bitfinex, had invested significant funds into long positions as bullish sentiment rose in July.

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