Since there is no limit on the limit up/ limit down of digital currency, short-term violent fluctuations may occur, and when such extreme market (soar or plunge in a short period of time) happens, the investors’ feelings can be completely different, lucky when investing in the right direction, and unhappy when trading in the opposite direction for whose positions may be liquidated in a short period of time.
However, some investors encountered a problem when closing positions — regardless of the size of the platform, whether it is the market price or the limit price, it is difficult to close the position in a short period of time.
After communication with the expert in the industry, possible reasons are shown in the following:
- The Market Liquidity is Instantaneously Evacuated
First of all, we need to be clear that the transaction must have a counterparty, and normally, both sides may adjust the trading strategy according to market conditions, therefore, the market liquidity is extremely fast under extreme market conditions.
Such cases may occur in extreme market: stop-loss (passive) and opening positions (active) on the same direction surge, while opening/closing positions on the opposite direction greatly plunge, resulting in “needs greater than supply”, which further pushes up (or pulls down) the price and makes the liquidity be evacuated instantly, leading to “long squeeze” or “short squeeze”. Therefore, when the market changes violently, the price at the time of placing the order will be difficult to execute, closing positions is believed to be hard, this is because the market changes too fast, the order price is not the best price in the market. This has nothing to do with the size of the platform, but a common problem that any market may encounter.
2. Some Platforms Maliciously Unplugged the Network Cable
Every time the cryptocurrency market suddenly surges or plummets, some people will experience the downtime due to the sharp increase in transaction volume and fast information update of certain exchange. An exchange has repeatedly been unable to connect to the server because of extreme market conditions (commonly known as unplugging the network cable), making some investors incapable of opening and closing positions in time. Even the oldest exchanges cannot avoid such a problem.
Most of the current currency exchanges are prone to problems in this sudden situation. Therefore, when trading the contract, investors should be aware of the risks that may arise in this respect.
As the market oscillates recently, causing abnormities like downtime, lag, etc. In this regard, Aaron, Risk Control Director of 58COIN, said: “Our system runs stably and has not been affected by the market fluctuation.” He added: “We’ve made preparations for the risk alarm and risk control mechanism in extreme market conditions, hoping to better protect the user’s trading experience, when necessary, we may use the platform risk reserves.”