In an exclusive interview with Cointelegraph, Ivo Crnkovic-Rubsamen, the Chief Strategy Officer and Technical Lead for Trading at the dydx exchange, pinpointed algorithmic trading firms as the primary cause of recent disruptions at some of the world’s largest centralized cryptocurrency exchanges.
According to Crnkovic-Rubsamen, the intense retail interest and swift price movements have prompted these firms to significantly amplify their order and cancelation requests to maintain their positions in the market.
“It’s common for a trading firm to 20 times the output of orders and cancels at a very busy time,” he explained.
This surge in activity coincides with notable technical difficulties experienced by leading exchanges such as Binance, Coinbase, Kraken, and Bybit.
These issues emerged shortly after Bitcoin’s price surpassed $60,000 for the first time in more than two years on February 28.
Crnkovic-Rubsamen remarked that such situations are typical in bull markets when there’s a spike in retail interest and substantial price movements.
READ MORE: Bitcoin Withdrawals Surge as Exchanges See Largest Outflows in 5 Years Amid Price Rally
The fallout from these outages included Citron, an investment research firm, recommending a short sale on Coinbase stock, which then saw an 11.36% increase in its value within 24 hours, trading at $229.15 according to Google Finance.
Crnkovic-Rubsamen highlighted a significant difference between centralized exchanges (CEXs) and decentralized exchanges (DEXs), particularly in how they manage trading limits for market makers.
In CEXs, trading limits can be customized based on trust, leading to potential system overloads during bull markets.
This contrasts with DEXs, where trading limits are protocol-defined, eliminating favoritism and ensuring stability regardless of market conditions.
He also touched upon the reliability of centralized exchanges, acknowledging their efficiency and optimization under normal conditions but noting their vulnerability during peak periods.
“Centralized matching engines are awesome at performance, they’re super optimized and efficient, but when they go down, that’s it […] There is a reliability trade-off there,” Crnkovic-Rubsamen concluded, highlighting the inherent stability challenges faced by centralized platforms compared to their decentralized counterparts during times of intense market activity.
Read the latest crypto news today
