Earlier this year Coin Market Cap, one of the leading pricing information websites in the cryptocurrency sector, readjusted how they calculated the market capitalization of currencies by removing order data originating from South Korean exchanges. The change had a near instantaneous effect across the entire market, knocking prices down significantly with Ripple’s XRP taking a 20% nosedive within minutes. Coin Market Cap has since reinstated the tracking of South Korean exchange order books to make their capitalization and pricing determinations, but the flash crash showed just how easily market capitalization could be moved in either direction.
In fact, according to artificial intelligence data scientist Ishtiaq Rahman, it doesn’t take much to swing the markets by hundreds of millions, even billions, of dollars.
Though not a conclusive or expansive study, preliminary investigations by Rahman indicate that just $28 million dollars in bullish trading could swing the capitalization of the most popular cryptocurrency in the world by a whopping $1 Billion.
Rahman’s report centers around a 1-minute snapshot taken in the cryptocurrency markets:
(Chart Source: Ishtiaq Rahman)
We can now estimate that the total volume of Bitcoins traded in ALL markets during that 1-minute was about 2181 Bitcoins (~23 million USD worth) from the fact 65 Bitcoins traded on Gdax represented 2.98% of all Bitcoin trade volume in the world.
The actual total volume should be lower since it is unlikely that all markets are completely efficient and received the same magnitude of above average volume like Gdax did during that 1-minute in question — But we will continue with this estimation for simplicity.
This means that during that 1-minute, $23 million USD worth of bullish trades increased total market value of Bitcoin by over $1 billion USD (.557% of $180.77 billion total value of all Bitcoins)
Crudely put — It is possible for someone with access to $23 million USD to pump the price up by .557% in one minute.
Rahman provides several charts visualizing the market trading activity for the time frames he studied and shows that not just Bitcoin, but the second largest cryptocurrency Ethereum, showed similar market cap movements:
Total volume traded on Gdax during that one minute was 120 ETH and resulted in a .41% increase in the price of Ethereum.
… we can estimate that a $3.57 million USD worth of bullish trades in Ethereum resulted in an increase of $363 million to the total market value of all ETH(.42% of $86.44 billion USD, total market value of Ethereum)
With leveraged trading and future contracts now being introduced into the Cryptocurrency marketplace, we can expect to see major swings in both directions going forward, which is probably not too surprising to crypto investors who often see 10% to 20% price swings on a daily basis.