Today's price moves in crypto are a strong argument for industry wide circuit breakers. The crypto markets structurally broke today & leading exchanges need to work together to prevent a repeat.
@CiaraHuobi
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There is a reason there are circuit breakers in traditional markets. They work.
Also, flash loans are a terrible idea. Financial systems need time to settle. Instant txn's involving millions of dollars is dumb. Human oversight is important to prevent systemic failures.
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What is that reason and who are they working for? Traditional markets are monopolies so it’s not a fair comparison.
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I don't understand the question....
My point is that circuit breakers add stability to a (leveraged) system, allowing cooler heads to prevail. A downward liquidation spiral to zero helps no one. Who gives a shit if your new financial system is "decentralized" if it's fragile?
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Leverage is dangerous without any checks. If crypto was unlevered? Fine. Let the market work. But we now have crazy 100/1 levered futures. This creates systemic fragility. Either incorporate circuit breakers or get rid of the leverage.
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That’s the lender’s problem. If the exchange is the lender, and massively over exposed/naked, circuit breakers or “maintenance” or whatever to buy time for the market will turn around before you have to bankrupt yourself and all clients makes sense but it’s not without losers.
There are severe negative externalities to cascades of liquidations. It is not only the lender's problem
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Absolutely. I find it kind of ironic that BTC was born out of the financial crisis, and the leveraged system that enabled it’s collapse.
And yet we find ourselves making the same mistake of introducing leverage induced fragility into the system meant to replace the old one.
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No, it’s not just the lenders problem. Everyone holding BTC and ETH got their shit kicked in today because of leveraged lenders. There is collateral damage. Let’s stop pretending there aren’t consequences to the way we design these systems.
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You can't lend more than you have. If we're talking about derivatives, the sky's the limit, as market blowups have proven over and over. It's not the problem of exchanges but of people getting over exposed and then scrambling to cover on smaller, hard asset, index constituents.