Fundamental technology issues in the crypto market is a huge problem. Last summer, Coinbase’s GDAX allowed the price of Ethereum to crash to $0.10. Someone accidentally fat- fingered their million dollar order and stop-loss orders were automatically executed. Had a simple technology like “circuit breakers” been in place, huge losses for Ethereum holders would have been prevented.
The flash crash of Ethereum is an extreme case, but “stop-loss hunting” is common practice. It’s a strategy that forces holders out of their position by driving the price of a cryptocurrency down temporarily. Unsuspecting holders who have a stop-loss set to protect themselves on the downside will execute their orders. Traders who initiated this will now profit from the decline as the price will increase back to true intended levels.
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