Explained: How bitcoin market sell orders cause flash crashes
Although it might technically be true that a sufficiently large market sell order on a particular trading pair could temporarily crash that pair’s bitcoin price, this bearish rhetoric is often overreaching. In reality, bitcoin has the deepest depth of market for any crypto asset in the world. Moreover, traders update bids across markets within fractions of a second thanks to arbitrage and multi-exchange software. Take, for example, a fear-mongering claim that a $4 million market sell order on Curve Finance’s BTC/USDT trading pair would “ crash ” the price of Bitcoin 20%. While this claim was technically true, in practical terms, it is in fact meaningless. For a fraction of a second, the final fill of a $4 million market sell order on that particular pair would have printed at a “ flash crash ” price. However, that price would have been anomalous and isolated. Bitcoin trades across thousands of spot and derivative trading pairs on hundreds of centralized...