Earlier this week bitcoin markets saw relatively dramatic price movement across the major exchanges. On the afternoon of May 6, an expeditious 2% sell-off began, driving the market from approximately $236 to $228 in just over an hour. While bitcoin markets are certainly used to general volatility, the subsequent fluctuations brought pause to a number of traders, with a particular focus on Bitfinex, the world’s largest USD exchange by volume.

As visible in the tick-by-tick chart above, Bitfinex appears to lead the market on both the way down and subsequent rebound. As the general market leader by volume, that’s not particularly surprising to see, but the activity that occurred shortly thereafter was rather unusual – even for the nascent bitcoin markets.

10 minutes after the initial sell-off across exchanges, Bitfinex quickly pulled away from the rest of the market, trading up to $236, or more than a full point away from other major USD exchanges. Just two minutes later, Bitfinex again dropped precipitously down towards $226 as the remainder of the market began to level off above $231. Notably, Bitfinex saw nearly 18K XBT traded during this brief period, more than 3.5X the other leading USD exchanges combined.

The chart below shows every tick on Bitfinex during the period in question. Additionally, the red and green bands show order book depth of 10 XBT on Bitfinex, as recorded by TradeBlock’s market data systems approximately once per second. Generally speaking, there should never be a tick above the best offer or below the best bid.

Standing out as rather odd is the observable data during the dramatic climb from 21:48:58 UTC through 21:49:45 UTC (highlight A). Over the ~30 full order book snapshots taken during that period, none have an offer listed above $233 out to 10 XBT of book depth, yet ticks printed well above $233 for the better part of 30 seconds. Adding this data to the numerous reports from customers of orders executing in the wrong direction and questionable balances reported leaves much to be addressed.

It’s worth noting that the data collection method for order books is imperfect. Due to the lack of availability of streaming order book data from Bitfinex, granularity can only be ascertained as frequently as an API call is sent requesting the latest order book snapshot. This, combined with exchange latency and data transfer latency, can lead to modest misalignment on occasion. The expected effects of such a misalignment appear in the areas highlighted as ‘B’ on the chart. Even with latency and non-streaming data considered, for there to be that many ticks upwards of $233, one would expect there to be supporting data from the dozens of order book data points collected over that period.

Trading Break

Adding to oddness of the scenario is the break – and effective reset – of trading patterns at the end of that trend. Over the 47 second period in highlight A, as the price climbs from $231 to $235.66, there is at a total of 293 printed ticks – or an average of six per second. Then, just as the peak price is reached, nothing happens for a full seven seconds until trading resumes at $231.54. This may have been an automated stop set by the exchange to prevent cascading margin events, but nonetheless remains a significant outlier in the general trading patterns realized during that period.

Eight Decimal USD Prints

Another somewhat-less-noticeable anomaly occurred towards the tail end of the high volatility period. From 22:00:10 to 23:17:11, a total of 99 trades were printed with USD prices extended out to eight decimal places. While unclear beyond speculation what would have caused the exchange to print trades at prices precise to thousandths of a cent, it is clearly an anomaly.

In reviewing the past 30 days of tick data from Bitfinex, the only ticks with USD prices extending beyond the standard two decimal places were the 99 that occurred over that period. Moreover, both Bitfinex’s API and interface only allow price inputs out to two decimal places, so something was tangibly amiss with that 1,144 XBT worth of trades.

XBX Performance

As mentioned previously, the events described above are not particularly uncommon to bitcoin markets. With the world’s leading USD exchange trading off from the rest of the market by multiple points with high volume and prints through the visibly tradable book, the need for a robust bitcoin reference rate is once again highlighted.

The algorithm underlying the TradeBlock XBX index is uniquely designed to track liquidity while also protecting market participants from these types of events. As shown in the charts below, the XBX index discounted the anomalous trading at Bitfinex in real time, creating the world’s most reliable and tradeable bitcoin spot reference.