Binance and Coinbase crash caused by algorithmic trading firms – dYdX exec

Recent outages at some of the world's largest centralized cryptocurrency exchanges are mainly caused by algorithmic trading firms, Ivo Krankovic-Rubsamen, chief strategy officer and technical lead at Dykes Exchange, told Cointelegraph in an exclusive interview.

“Because there is so much retail interest and the price action moves so fast, all algorithmic trading firms greatly increase the speed of order placement and cancel what they want to send to the matching engine to secure their positions. […] It's common for a business to overbook 20 times the order and cancel it when it's at its busiest.

A few days after bitcoin breached $60,000 for the first time in more than two years on February 28, some of the world's leading exchanges, including Binance, Coinbase, Kraken and Bybit, experienced technical issues.

Krankovic-Rubsamen added: “We see this every time there is a bull market or a retail demand focused and big price move.”

Following the temporary suspension, investment research firm Citron has called for a short sale on Coinbase stock. According to Google Finance data, the stock rose more than 11.36 percent in the 24 hours to 12:25 pm UTC.

According to Crnkovic-Rubsamen, like decentralized exchanges (DEXs), some centralized exchanges can set custom trading limits for individual market makers based on trust assumptions, which contributes to growing workloads in bull market conditions.

“[Centralized exchanges] They might have a market maker who knows better… and they set their price limit 10 times higher… that makes perfect sense. But the bull market comes and this market maker PEPE wants to trade 10 times faster and suddenly the price limit for them is a problem.

In contrast, DEXs do not have direct contact with market makers, so the price limit on decentralized exchanges is set by the protocol. Rubsamen added that centralized exchanges can be very reliable during normal trading, but can be less reliable than DEXs during periods of heavy bull market activity.

“Centrally coupled engines are amazing in terms of performance, they're super optimized and efficient, but when it comes down to it, that's […] There is a safe trade-off,” Krankovic-Rubsamen said.

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