The Problems Experienced by Exchanges May Have Contributed to the Intensity of Yesterday’s Crash

All eyes have been on bitcoin in recent days, as btc ramped up to establish new highs and test the key area of $3000. When the area failed to hold prices began to retrace – triggering a crash of up to approx. 20 percent in just a few hours. Kraken, Coinbase, Gdax, and Poloniex were all reported to be experiencing technical difficulties during the crash – leaving many traders unable to manage or exit their positions.

The problem of cryptocurrency exchanges experiencing technical difficulties has been a persistent theme throughout 2017’s dramatic bull trend. Following a 600% rise in trading activity and several ddos attacks, Poloniex has had numerous issues in recent months. Complaints of slow loading speeds and trade executions, drastic slippage, and errors while attempting to log in during critical periods of high volatility have been widespread. Coinbase, Gdax, and Kraken have garnered criticism from traders too, with reports of users struggling to access their accounts during moments of intense volatility during bitcoin’s recent uptrend being widespread.

The problems experienced by exchanges may have contributed to the intensity of yesterday’s crash. Coinbase, Gdax, Kraken, and Poloniex all experience difficulties during the same period, resulting in a significant number of traders having found themselves locked out of their accounts. The threat of being unable to manage one’s accounts during a period of intense volatility sends emotions running high, prompting many traders to close their positions and cancel open orders to minimize risk exposure in case they are unable to manage their trades. This intensifies aggressive price moves like yesterday’s crash, as traders simultaneously race to exit the markets.

The Difficulties Experienced by Exchanges Have Consistently Posed a Challenge to Bitcoin’s Path Towards Mainstream Adoption

Last night’s problems again highlight the need for new or inexperienced traders to exercise caution when first participating in the bitcoin markets, as getting locked out of one’s account whilst in a heavily leveraged position may incur the risk of liquidation.

The difficulties experienced by exchanges have consistently posed a challenge to bitcoin’s path towards mainstream adoption. The troubles experienced by exchanges have continued to be a major catalyst for unexpected price moves, as evidenced by the hacking of Bitstamp in 2015 that triggered the $166 low of the post-2013 China-bubble sell-off, and the slew of problems experienced by Bitfinex that triggered a major reversal during June 2016.

With bitcoin’s user base showing exponential growth in recent months, issues such as those experienced last night are likely to become more frequent if a serious effort is not made by exchanges to ensure that periods of high volatility do not overload trading engines. An extra impetus should be placed upon industry leaders such as Coinbase to rectify these issues, who have recently sought a $1 billion USD valuation.