An alert on Twitter caused panic in the Bitcoin market after prices crashed 7% in just one hour. The alert stated that wallets linked to the now-defunct exchange Mt. Gox and the U.S. government had been activated, leading to speculation that a huge amount of bitcoin was about to be dumped.
Why are Mt. Gox and the U.S. Government Significant?
Mt. Gox was an exchange platform that shut down in 2014 due to losing bitcoin from customer accounts in a series of thefts.
There are still dormant accounts holding large quantities of bitcoin, and movement is expected with these accounts after some of them were activated earlier this week.
The U.S. government is also currently waiting to sell nearly 42,000 bitcoin it seized from fraudulent silk road user James Zhong. It has plans to do so in four batches by the end of October 2023.
These are both considered “supply overhangs” within the bitcoin community, as traders anticipate a dip due to the selling of large quantities of bitcoin.
Twitter user DB sent out an automatic alert that wallets associated with Mt. Gox and the U.S. government were activated, leading to the belief that large quantities of bitcoin were being sold.
Were the Alerts Accurate?
Both DB and Arkham Intelligence, the blockchain analytics firm that sent DB the alert in the first place, have since stated that the alerts were sent as the result of a bug fix.
Arkham later clarified that the alerts were not false, but they had been falsely labelled by DB. DB had set parameters for alerts that would trigger for movement of more than $10k but had not ensured they would only be associated with Mt. Gox or U.S. government wallets.
A bug at Arkham had prevented these alerts from being sent out. When this bug was fixed, DB received alerts that appeared to show that Mt. Gox and the U.S. government were moving bitcoin.
This turned out not to be the case, as blockchain explorers showed that no bitcoin has been moved from wallets linked with Mt. Gox, and any movement linked with the U.S. government has also been declared false.
Did the Alerts Cause the Price Crash?
Arkham Intelligence also claimed that the alerts could not possibly have caused the price crash, as the tweet was sent out after the crash had already reached its bottom.
“Neither the alert nor the tweet could have caused the sharp BTC price drop today, as the drop occurred between 19:17 and 20:01 UTC, and the alerts and tweet were sent afterwards at 20:07 UTC and 20:08 UTC respectively.”
The timing is certainly a massive coincidence, but it does seem that unless some traders can see one hour into the future, the tweet couldn’t possibly have caused the crash.
What did cause the crash is currently unknown, but considering the price of bitcoin has almost entirely rebounded in the hours since, traders and hodlers alike are unlikely to be too worried.
