I'm sure you all are aware of this so I'll explain it short: On june 21st a huge ass set of sell orders was places on ether in an exchange called GDAX. Ether came down thousands of% to just 10 US cents in that exhange, but not others.
I don't think this kind of extreme events in cryptocurrencies will go away for a while. People trading cryptos aren't skilled in trading and pulling of this kind of operations on them can be done by someone smart enough with necessary capital and nothing better to do.
If you are a financial professional you'll probably do better managing a boring fund in an investment bank than day trading alt-coins in your basement. Rational trading, arbitrage and risk management is needed to make markets stabile.
Crypto market differs from traditional financial markets in terms of size, volatility and infrastructure. These kind of markets don't really allow risk management at least in terms a financial professional would consider. When managing huge amounts of someone else's money, there is really no point in giving crypto currencies any attention. For traditional financial players our volatility in unbearable no matter how good the return might be and because crypto market appears to be so disconnected from other financial markets there are basically no means of hedging risk except these orders in exchange.
Actually, what I often think about is that even though we love decentralised stuff and the new way of doing things, we confine a bit portion of our trading into centralised and small exchanges that are just copies of services that barely fill the needs of even traditional financial markets.
The main thing is that from financial point of view cryptocurrencies are very bad investment because they are extremely volatile and look like ponzi schemes. We see the underlying potential value of this innovation and technology but we are the early adopters and we can't expect the common folk to agree with us. That's why agents that would stabilize these crypto markets with rational trading and arbitrage and provide more capital will stay a away for a long time. We are left with a market of mainly irrational traders, few high stakes gamblin' hustlers and us honest anarcho-capitalists.
People everywhere are discussing about this and whether we need regulation or circuit breaks in crypto markets like we have in traditional markets.
Regulation is always and by nature imposed by a party capable of crushing other partied into submission by violence. Regulation, when acted, is always and by nature exercising force to make someone do something they wouldn't voluntarily do.
It's clear that if we want to set rules, we can come to an agreement and no-one in their right mind would come up with wanting to set up systems that limit our individual and collective freedom.
Just buy and hold, balance every few weeks and (apparently) always (ALWAYS) use cold storage.
Thank you for this nice article and offering your opinion. I think that this is indeed the kind of Wild West of trading at the moment with all the cryptocurrencies going crazy. But then again, regulation to make it more similar with other financial markets in my opinion take away the kind of alternative status of crypto. We will probably arrive there at some point but it seems that we should delay that for now and use cold storage for taking away the risks put in front of us. Have fun out there and good luck with your future posts.
Great article!