Bitcoin Flash Crash on Binance Corrected by Arbitrage Traders
What people saw-and why it looked terrifying
Around Christmas Eve/Christmas, Dec. 24–25, 2025, screenshots began trending in social media that showed Bitcoin “crashing” from the $87k area down to about $24,111 on Binance, which is a drop of roughly 70%+ in one candle.
To the casual observer, that looks like the kind of catastrophic collapse you’d expect from:
a huge macro shock,
a rumor about exchange insolvency.
a liquidity cascade,
or a huge hack.
But none of that was happening broadly.
Main point here: this “crash” wasn’t Bitcoin globally falling to $24k. It was a localized price wick on one specific trading pair on Binance: BTC/USD1.
2) The most important detail: it happened on one pair only: BTC/USD1
On Binance, Bitcoin trades against many quote assets: USDT, USDC, FDUSD, fiat pairs, etc. The weird candle happened on BTC/USD1 while takers of major pairs, like BTC/USDT, didn’t show anything close to a $24k print.
So, the “flash crash” was:
pair-specific (BTC/USD1),
exchange-specific – Binance spot, in that pair –
Microstructure-driven: Informed trading using an order book and liquidity.
This is why sometimes you may see a shocking candle on one chart while everything else looks normal across the rest of the market.
- What does the USD1 stand for, and why was it a participant?
The USD1 is a newer stablecoin in reporting around the event, associated with the firm World Liberty Financial-frequently described as Trump-family-backed in crypto media coverage.
A new pair for a stablecoin typically has:
Lower volume.
fewer market makers,
thinner order books,
and wider spreads.
That makes it fragile, especially during the quiet hours.
4) The actual culprit: thin liquidity + a market order that “swept the book”
How an order book makes “flash wicks”
On an exchange, the current “price” is essentially the last matched trade. Trades are performed by matching:
limit orders on the book-both bids and asks waiting to be matched-and
Market orders that immediately take liquidity.
If a trading pair is illiquid, there might be very few bids at each price level. If someone places a large market sell, then the matching engine will fill it by hitting the highest bid, then the next bid, then the next… until the sell size is fully executed.
If the bids are sparse, that market order can chew through the book and print trades at a lot lower prices, creating a long lower wick, even though nothing happened to the “fundamental” value of Bitcoin.
That’s exactly the explanation echoed throughout all the reporting on the moment: the BTC/USD1 order book was ultra-thin, and a single large market sell, or just a few aggressive sells, likely cleared out bids fast enough to momentarily print ~$24k.
Why Timing Mattered: Christmas
Liquidity normally goes down during holidays because
fewer active discretionary traders,
reduced the appetite for risk in market making;
Sometimes thinner staffing/monitoring.
Several reports clearly make associations with the event and holiday low-volume conditions.
BeInCrypto
+1
5) The “fuel” behind the thin book: a USD1 yield promo and stablecoin flows
Several sources say that Binance had a high-yield promotion around USD1, often referred to as ~20% APY/fixed annualized deposit promo, which encouraged traders to move funds into USD1.
The rough idea is as follows:
A strong incentive, such as ~20% deposit yield, would create demand for USD1.
Other stablecoins, for example, USDT, are exchanged for USD1 by traders who want to join in.
This can push USD1 slightly above $1-a small premium, it was explained somewhere above.
In doing this, market participants look for ways to source USD1 quickly, sometimes by selling BTC into USD1 directly.
If lots of people are trying to push through a new, thin BTC/USD1 market, the liquidity can get weird.
One such extended narrative doing the rounds-including via a Binance Square post quoting commentary attributed to people involved in DeFi markets-describes flows involving borrowing USD1 using BTC-linked collateral elsewhere, then selling into spot markets to meet demand-adds pressure to the BTC/USD1 order book.
Even if you don’t follow every DeFi leg of that story, the core is pretty simple:
Strong demand shock for USD1 –
Thin BTC/USD1 liquidity
- an aggressive sale in the market
a one-pair “crash wick.”
Why arbitrage traders corrected that so fast.
And this is the fun part—and the part in your headline.
What arbitrage does in plain English
Arbitrage is the act of traders taking advantage of a price difference in the same-or-equivalent asset across venues or pairs.
That would be an absurd discount if, for instance, BTC is trading at ~$87k on liquid markets but prints $24k on BTC/USD1.
Your arbitrage bot can achieve something like this activity:
Buy BTC on the cheap pair – BTC/USD1 at the “broken” price,
Sell immediately BTC on a liquid pair/venue where BTC is still ~$87k.
Pocket the difference – minus fees/slippage.
And in that process, the buying pressure of those pushes the cheap pair back up toward the real market price.
Coverage repeatedly remarks that arbitrage bots/traders stepped in within seconds to buy the underpriced BTC and restore the BTC/USD1 price back to near the broader market.
Why it can happen in seconds
Crypto is heavily automated. Many professional traders run:
cross-exchange arbitrage,
cross-pair arbitrage,
triangular arbitrage within the same exchange.
In fact, several academic works have found that arbitrage strategies, such as triangular arbitrage, are common in Binance and are often bot-driven-so it is not really surprising when a glaring mispricing is corrected almost instantly.
7) “Did this cause liquidations?” Binance/CZ commentary says no
One of the things that people fear in sudden drops is a liquidation cascade, especially when the price drop hits indexes used by derivatives markets.
“In a post on Binance Square, quoting CZ’s clarification, it was said:
did so due to low liquidity on a newly listed pair.
it was quickly corrected by the arbitrageurs,
this, in turn was because this pair wasn’t included in an index so did not trigger liquidations.
That is a distinction that matters:
A proper market crash tends to spread to multiple pairs and venues and even reaches the derivative pricing.
A single-pair wick can be intimidating on a chart but may not touch the broader system.
8) Why a “flash crash” can be real and not real
This sounds contradictory, but it isn’t.
It was “real” in the narrow sense
Trades probably took place at very low levels-let’s say, at least briefly-on BTC/USD1, that is:
means someone got filled at awful prices-if they market-sold.
but someone else got awesome fills if they purchased the wick.
The candle is part of that pair’s market history.
It was not real in a broader market sense.
Bitcoin did not globally reprice to $24k across exchanges.
That price was never visible to most market participants unless they were actually trading that pair at that instant.
9) Mechanical (step-by-step) explanation of how this wick likely formed.
Here is a clean, practical reconstruction consistent with reported explanations:
BTC is trading normally around ~$87k across major pairs.
BTC/USD1 is relatively illiquid, as USD1 is a new market and the volume is lower.
A USD1 promo creates an unusually high APY of around 20%, driving unusual flows and attention to its markets.
Somebody puts a large market sell on BTC/USD1 (or several aggressive sells in a very short period of time).
The order sweeps through the buy levels quickly because of thin bids. The result is that it is printed progressively lower trades.
The last fills happen way down the ladder—creating the ~$24,111 print.
Then, the arbitrage bots detect a huge dislocation and instantly buy BTC/USD1 while hedging/selling elsewhere.
In other words, it gets refilled/raised with buy pressure, and the price snaps right back to ~$87k in a matter of seconds. Binance +2 Bingx Exchange +2 10) Who “won” and who “lost” in a wick like this? Probable losers Whomever used market sell on that pair at that moment. Anyone whose stop-loss went to market on the same illiquid book. Whomever is trading with inadequate protection (no limit orders, no slippage protection). Likely winners Arbitrage bots and liquidity snipers who got fills near the bottom of the wick and could hedge instantly. Market makers who were able to re-price quickly and capture spreads depending on their inventory/risk controls. 11) What this teaches traders — important lessons. Lesson A: “Price” depends on where you’re looking A screenshot is not the whole market. Always check: multiple exchanges, multiple couples, with an index price, if possible. A single-pair chart can lie to you-especially on low-volume pairs. Binance Lesson B: Market orders are dangerous in illiquid pairs
