On the evening of Aug 18, bitcoin markets realized a rapid and substantial sell-off across major exchanges. Prices began declining around 11:30pm UTC and stabilized only 30-45 minutes later. During this window the XBX Index fell by as much as 13% to touch $216, ultimately recovering some of its losses. Over the same period, Bitfinex, the world’s largest USD exchange by volume, diverged from the broader market, printing trades as low as $162, or a 35% decline within a 20-minute window.

Over the one-hour trading period highlighted above, ~70k bitcoin changed hands at Bitfinex; this compares with an average daily volume of 20k bitcoin at Bitfinex over the past month. The tick chart above provides further evidence that Bitfinex led the price decline, with levels at various other exchanges following suit, albeit to a lesser extent.

The screenshot below highlights a portion of the same data, as seen on the TradeBlock Professional platform. The top chart in the image shows the differential of each exchange relative to the XBX Index, while the chart below portrays actual tick-by-tick data in real-time. As is apparent from the visualization, Bitfinex was not only trading in excess of 10% away from the rest of the market, but also with a multi-point bid/ask spread, leading to significant jumps between ticks.

Bitfinex Order Book Analysis

According to a Twitter post by Bitfinex, the automated selling occurred due to margin calls being triggered on leveraged positions. Market participants on various forums have suggested that trades were printed through the order book during this volatile period. While we have witnessed Bitfinex print trades through the order book at several occasions in recent history, our analysis of Tuesday’s order book data shows that execution was generally in line with expectations, albeit with apparent increased latency during periods of higher volume.

The blue dots on the chart above illustrate every tick on Bitfinex during the period in question. The green and red series show the order book depth of 10 bitcoin on Bitfinex, as captured by TradeBlock’s market data systems (approximately once per second). We note two key observations from the chart above:

Bitfinex trade prints appear within the appropriate bid/ask range on the order book, insofar as available data would indicate. While there are reports of trades not getting filled that should have been, the data indicates most trades were filled within expected bounds of the order book, even during the most volatile periods.

There appears to be notable data latency when measuring the distance between tick timestamps and order book data. The differentials shown in the chart above indicate the time delay between when TradeBlock received order book data and the formal timestamps (as provided by bitfinex) on the eventual ticks related to those order books. For instance, the differential measured when the price spiked above $250 indicates roughly 90 seconds of execution latency. Moreover, as volatility and trading volumes subsided, delays were essentially eliminated.

XBX Performance

Worth noting is the performance of TradeBlock’s XBX Index during this event. Designed as a reference rate to track bitcoin liquidity while also adjusting for deviations caused by anomalies and manipulation attempts at individual bitcoin exchanges, the index performed exactly as expected.

As shown in the chart below, the XBX algorithm automatically discounted the impact of the single-venue events at Bitfinex during the anomalous period, resulting in a highly reliable benchmark for the price of bitcoin.

The XBX Index serves as the reference rate for Grayscale’s Bitcoin Investment Trust, the world’s first publicly-traded bitcoin investment vehicle; Hedgy, a provider of blockchain-settled derivatives; BitMEX, a digital currency derivative trading platform, and thousands of bitcoin in daily over-the-counter trading on TradeBlock Professional.