A Sudden CollapseSep 8, 2021
More often than not, events like yesterday are completely explained by a sudden collapse in liquidity. Take a look at the bid-ask spread for a $5M BTC futures buy. The spread was never above half a percent, until suddenly it jumps up to 4% on Deribit and around 1.5-2% on other exchanges.
This corroborates the liquidation idea from above. Nobody actually wanted to sell their BTC at $42-44k. The ones who did sell were traders whose longs got liquidated, making them forced sellers. With few traders looking to sell, the ask side of the orderbook dried up, causing the bid-ask spread to rocket for a very brief period.