On Tuesday, tokens of cloud blockchain infrastructure provider Chain.com (XCN) all of a sudden lost over 90% of the value before recovering many of their losses later within the day. Inside a publish-mortem analysis printed by Chain.com, the firm stated that the market maker and API error at 1:00 pm SGT (5:00 am UCT) started to result in XCN to decrease in large percentiles. Because the event required place, corresponding bids grew to become stuck via API orders, causing further downward selling pressure because of low liquidity and margin calls.
But by roughly 3:00 pm SGT (7:00 am UCT), developers at Chain.com contacted exchanges and market participants the issue wasn’t as a result of breach or exploit, and costs started to recuperate. Based on Deepak.eth, Chief executive officer of Crypto.com, just one large margin call seems to possess exacerbated the flash crash. As almost as much ast 500 million XCN price of tokens purchased ($42.24 million sometimes of publication) through leveraged was liquidated within a brief period.
There appears to possess been a sizable margin ask #XCN markets. We’re dealing with exchanges and our market makers to recognize the problems.
— Deepak.eth ⛓ (@dt_chain) June 14, 2022
A token’s cost doesn’t necessarily correlate on the proportional basis with alterations in demand and supply. Contrary to public opinion, a single large trade or a number of substantial buy/sell orders in a brief period may cause disproportional impacts on the token’s cost, particularly when there’s little liquidity.
For instance, as first pointed out by crypto enthusiast dev.eth recently, crypto project Cope observed a 77% stop by its token cost after develops stated that they have to sell coins “to help keep dev dealing with this hard time.” However, as a result of insufficient liquidity, all it required was for that developers to market just 10% of remarkable COPE tokens to result in the huge drop.
