BitMine’s Tom Lee Highlights Causes of Ongoing Crypto Market Drop

Tom Lee, BitMine co-founder and pro-crypto leader, has aired his opinion about the current market volatility. In a CNBC interview, Lee said crypto is struggling because big trading firms are short on cash.

A technical malfunction at a key exchange has added to the uncertainty for traders and investors.

Liquidity Crunch Amplifies Market Stress

During the interview, Lee said that big trading firms, which help keep the crypto market running smoothly, lost a lot of money during the October 10 crash. When these firms lose money, they often trade less, take fewer risks, and sell assets to get cash.

Lee said that when these firms sell, it pushes crypto prices down even more, which can cause more offloading in a cycle that keeps the market weak. He called the current situation a long period of falling prices after the first crash. 

The industry leader compared it to events in 2022, which took about eight weeks to calm down. Right now, the market is six weeks into this cycle, so it might need more time before things stabilize.

A Stablecoin Glitch on Binance Deepens the Market Selloff

The selloff was intensified by a technical incident involving a stablecoin, USDe, on Binance exchange. During the October 10 crash, the stablecoin briefly dropped below its intended value on the platform. 

At the same time, other exchanges reported it near its target. The exchange’s internal pricing system mistakenly accepted the lower price, triggering automatic liquidations across many accounts.

The firm founder explained that the issue arose from an automation flaw, where the exchange relied solely on its internal data instead of combining information from multiple sources. 

Lee described the glitch as a code error, similar to other past market failures where a single issue triggers widespread consequences.

Following the incident, Binance announced it would refund users who were wrongly liquidated and said it had updated its systems to prevent similar errors. 

Debate Grows Over What’s Really Driving the Crypto Selloff

The market’s decline has sparked debate among observers. Investor Mike Alfred suggested on social media that futures and derivatives are being used to push prices lower, forcing out traders who entered at higher levels. 

Lee agreed with this view, which has generated discussion in the crypto community. Critics say these claims often come up when the market is falling. Also, the selloff might just be a normal correction after too much buying left many traders with too much risk. 

Others pointed out that prices can drop when people rethink risks or sell their positions during uncertain times, without any manipulation. Analysts advise traders and investors to be careful. They warned that it could take a few more weeks for the market to recover and for systems to get back on track.