#kaiko posted the following chart which is of huge importance for every market participant in crypto:
It show the market depth of #BTC in major exchanges. As you can see, there’s a sharp drop in market depth around the time Cointelegraph tweeted the fake news. And over time the depth restored.
Why did this happen?
Well, there’s no easy answer to that. But what it shows is that when volatility increases, market makers remove their orders and depth becomes very thin. This action makes sense from risk management perspective for MMs. The lack of market depth creates inefficiencies.
If you are someone who trades in crypto here’s some important points to keep in mind.
- don’t send market orders during high volatility, if your order size is large market impact can be huge.
- don’t trade with large leverage, because even your bet is in the right direction the market can easily be manipulated
- watch for liquidity zone before you buy and sell (in between the price will move freely)
