On Wednesday, June 21st, an investor sold a large quantity of Ethereum currency on GDAX, a digital currency exchange. It’s not known exactly why this sale was made or who made it, but the resulting effects were tremendous.
Ethereum Crash – A Sudden Drop
The sale was equal to millions of US dollars, which caused the price per Ethereum to plummet temporarily. This triggered about 800 stop loss orders that were put into place by other investors. Sadly, these orders don’t guarantee the sale of the coin at a certain price. They only trigger when the price falls below a certain amount.
These multiple sell orders going through at once made Ethereum fall even further. Some say the price dropped as low as 10 cents a coin before it rebounded over $300 within a few hours.
Average Investors Okay, Traders Not
Most of the damage was done by these sell orders. Traders and some buy-and-hold investors who put them in place could have lost thousands of dollars by the automatic sale of Ethereum at wildly low prices. Luckily, those who didn’t have orders in place, saw the value of their investments return fairly quickly.
What It Means for the Future?
Ethereum will likely remain below $350 for the near future due to nerves over the flash crash. However, time heals all wounds. It will be hard to traders to stay away from this digital currency. Ethereum saw tremendous gains in the first half of 2017, and it could potentially go even higher in the long-term.
Additionally, Bitcoin will likely see some major price fluctuations as the date of the hard fork moves ever closer. Traders could see Ethereum as a nice way to keep their cash investment safe while waiting out the potential roller coaster of price changes in Bitcoin.
Can This Happen Again?
A flash crash could most definitely happen again. However, it requires a specific chain of events to occur. A large investor would need to sell all at once on an exchange. Plus, there would need to be sufficient stop loss orders in place to help the price go down even further. GDAX reports that they are currently investigating the issue. There may be some policy changes coming to help prevent this from occurring again.
One easy way to protect yourself from flash crashes is to avoid putting stop loss orders in place on your digital currency. Or at least, only put them on a small portion of currency to help prevent the loss of your initial investment.
Where Else to Invest
Ethereum and Bitcoin aren’t the only players in the game as there are a handful of other cryptocurrenies with a lot of upside and systems but in place to protect against crashes or large orders manipulating the market. One of these cryptcurrencies is OneCoin, who’s block chain runs every minute setting it apart from other cryptocurrencies.