Bitcoin flash crash, balance at zero… Crypto exchange Coinbase creates cold sweats

While bitcoin surpassed its historic peak this Tuesday, March 5, the American crypto giant is having difficulty managing the influx of traffic.

For several days, Coinbase users have been experiencing cold sweats. Latest scare: the bitcoin/euro trading pair suffered a “flash crash” on Coinbase, shortly after bitcoin surpassed its all-time peak, reported Coindesk. As a reminder, after the great upheavals of 2022 and 2023, bitcoin exceeded its historic record of 2021 on Tuesday March 5 to reach more than 69,000 dollars.

On Coinbase, the price of bitcoin reached 69,325 dollars (or approximately 63,636 euros), before falling again. But shortly after, the queen of cryptocurrencies plunged to 48,529 euros from 60,000 euros on Coinbase, losing 23.7% of its value.

“The reason for the flash crash remains unclear and it took 10 minutes for the price to return to parity with other crypto exchanges,” underlines Coindesk.

Two hypotheses can be raised: either there was a lack of liquidity in a context of market boom, or it was an order entry error, also called “fat finger” in stock market jargon. This is notably what happened on October 21, 2021, when the price of bitcoin rose from around $65,760 to $8,200 on the crypto exchange. Binance USa fall of 87%, before returning to its initial level.

Balance at zero

This is not the only difficulty faced by Coinbase customers. Recently, several users have seen their account balance drop to zero. A scenario which first occurred last week, when the price of bitcoin exceeded $64,000, and would notably be the cause of a downturn in bitcoin. The incident was not completely resolved, since it recurred on the night of Tuesday March 5 to Wednesday March 6.

Likewise, users encountered transaction problems on Tuesday, as the price of bitcoin soared. On X (formerly Twitter), some customers complained about not being able to sell or buy bitcoin. You will have to wait two hours for the problem to be resolved.

The fault of spot bitcoin ETFs?

How can we explain these recent problems? Part of the answer could be found in spot bitcoin ETFs. As a reminder, the American stock market policeman (the SEC) authorized 11 spot bitcoin ETFs on January 10, offered in particular by asset managers like Blackrock and Fidelity. Since then, investors have been flocking to these new products. An ETF (or Exchange Traded Funds) is an index fund trading on a stock exchange which follows the evolution of a stock index (or one or more financial or physical assets, such as gold) by replicating the increase as well as the drop in the price of this index (or these assets).

However, 9 bitcoin spot ETFs (including that of Blackrock) have chosen the cryptocurrency exchange platform Coinbase to hold their clients’ bitcoins. While spot bitcoin ETFs have been breaking records in recent days, the Coinbase platform could well have difficulty managing such amounts.