Flash Crash: Bitcoin Plunges 72% in Seconds - Lessons on Liquidity and Trading Pairs

On the morning of December 26th, the cryptocurrency market witnessed one of the most shocking moments: Bitcoin suddenly plummeted from $87,611 to $24,111 in just a few seconds, losing 72% of its value. Although this incident was localized, it serves as a reminder of the potential risks that any investor should be aware of when trading on low-liquidity pairs.

What Happened?

According to market data from 6:20 AM on December 26th, Bitcoin was still trading at $87,585, unchanged from the previous day. However, behind this stability lies a completely different story.

On a specific trading pair (trading pair) called BTC/USD1, Bitcoin’s price dropped like a rock falling into a canyon. From around $87,611, BTC crashed down to $24,111 – a decline of over 72%, which is catastrophic for the largest market cap asset. Fortunately, this sharp decline lasted only a few seconds before buy-the-dip orders kicked in, pushing the price back up to around $87,000.

As of now, Bitcoin is trading around $88,950, up 1.06% in 24 hours, returning to a normal rhythm.

What Is a Trading Pair? Understanding More About Trading Pairs

To understand this incident, first, it’s important to grasp the concept of trading pair (trading pair). A trading pair is the combination of two assets traded against each other. For example, BTC/USD1 means trading Bitcoin against USD1 (a stablecoin—an asset with a 1:1 value with USD).

When a trading pair has high liquidity (many buyers and sellers), prices tend to be stable. But when liquidity is low, even a small sell order can cause significant waves. This is exactly what happened with the BTC/USD1 pair.

Root Cause: Weak Liquidity

The community quickly identified the cause: this incident only occurred on a specific trading pair, not on BTC/USDT or BTC/USD on major exchanges. This confirms that it was a localized phenomenon, not a true collapse of Bitcoin.

USD1 is a stablecoin issued by a well-known financial organization. However, since it is relatively new, the BTC/USD1 trading pair has not yet built enough depth of liquidity. In the crypto market, when a low-liquidity pair lacks a deep order book, a sudden market sell order (market order) can “wipe out” all buy orders.

When there are no more buyers at $87,000, the price must slide down to lower levels to find liquidity, resulting in the “wick” of death down to $24,111. This is a micro-structural accident, not reflecting Bitcoin’s true value.

Past Precedent: The “Black Thursday” of 10/10/2025

Today’s incident reminds the market of a similar disaster less than three months ago. On the evening of October 10th, 2025, news of global trade tensions triggered a panic sell-off. At that time, Bitcoin dropped sharply from $120,000 to $102,000.

However, the major difference is that the October 10th event was not just a localized phenomenon. It spread across the entire market, dragging altcoins into a bloodbath. Over $19 billion in leveraged (long positions) were forcibly liquidated, impacting about 1.6 million investors worldwide. Some smaller exchanges even had to temporarily halt operations to control systemic risk.

What happened today with BTC/USD1 is just a “scratch” compared to the October 10th event, but it serves as a sharp reminder of how fragile liquidity can be in niche markets.

Technical Analysis: Structural Error or a Bigger Warning?

From a technical perspective, the “red candle” down to $24,000 is not a trend indicator but a micro-structural anomaly. Anyone active in crypto for a while knows that quote errors, trading bot inaccuracies, or sudden spread widening are constant risks, especially with new assets or trading pairs.

However, this incident also partly reflects the liquidity challenge of new stablecoins. Despite being backed by reputable names, USD1 still needs time to build market depth. Trading on low-liquidity pairs is like walking on a tightrope without a safety net; even a small tremor can cause significant consequences.

Risk Management Lessons

The event on the morning of December 26th has ended, and Bitcoin has returned to a stable trajectory around $87,585. But for those who set automatic Stop-loss orders or used high leverage on the BTC/USD1 pair, the losses are real and could be substantial.

The cryptocurrency market in 2025, although with clearer regulations, still harbors many surprises. The lesson from today’s incident is simple: prioritize trading pairs with abundant liquidity on reputable exchanges. Don’t just rely on the project’s reputation or sponsorship; check the order book depth (order book depth) and trading volume before investing. Wise investors always carefully consider before entering edge markets, regardless of how they are advertised.