What Happened and What Does This Mean for You?
Trading for ETH dropped to $0.10 per share after one multi-million dollar trade yesterday.
Someone spent $380 last night and became a millionaire this morning
At around 3PM yesterday, someone executed a multi-million dollar trade as the markets were going crazy. Users were having issues logging in, and trades were taking much longer than expected.
Another person (or maybe a group of people) became a millionaire. How? The multi-million dollar trade completely devalued the currency to $0.10 per share because of the massive dump (basic supply and demand).
This person had an order of 3800 ETH if the price dropped below $0.10. That costs around $380.
Now the price is back up around the $320 range.
That person spent $320 last and is now holding on to $1,200,000 of ETH.
So here's the consideration:
What was the genius behind this trade?
Well, yes, I'm going to answer the what because I can't answer the who. See, cryptocurrency markets aren't like stock markets. If you were going to trade stocks in the US, you would likely go to the New York Stock Exchange. You want the price for Apple? No problem it's $145 per share!
The crypto world is different. You want to trade crypto? Well, no problem, there's Coinbase, GDAX, Poloniex, Kraken, BITTREX, the list goes on and on and on... You want to buy ethereum? Well, it could be $300 on GDAX, $250 on Poloniex, $280 on Kraken, etc. etc.
Each market has its own price based on supply and demand within that market. This means each market is much more vulnerable to manipulation. Why? Because instead of having, for the sake of example, $10 Billion worth of Ethereum in one place, it is scatted so that maybe GDAX has $500 Million, then Poloniex has $2 Billion, then Kraken has $1.5 Billion, and so on and so forth. And they each set their own prices.
Still following? This is where it gets juicy.
See, it's much easier to move the price if a marketplace only has $500 Million of Ethereum as opposed to $10 Billion. Let's say someone, somewhere has $25 Million worth. They want to sell it all. Well, if the markets were all centralized then selling $25M worth in a $11 Billion market would mean nothing. But that's not the case.
The user would actually be selling it in, for example, a $500 Million marketplace. That's already 5% of the entire market supply. The prices would plummet due to the immediate increased supply within that single market.
What does this mean for you?
It could mean nothing. It could mean everything.
For one, it's just been done, and it's been proven that it could work. One guy plummeted the price, and another one (or even the same one) picked it back up at pennies. No one lost money. They made a huge profit of $1.2 Million + whatever the profits were from the multi-million dollar sale.
This may happen again
Why not? After all, it's just been proven that it can work. And it's not an illegal move, it is just a strategy to take advantage of the weaknesses in small markets. Until those marketplaces find a way to fully counter those kind of moves, there is a strong possibility that it can happen again.
Heck, if I saw this news and I was also a multi-millionaire Ethereum holder, I'd be calling my friends right now and figuring out how we could do the same thing!
So what should I do?
Well, I can't tell you what to do because I'm not a financial advisor and I'm not the smartest guy around.
I'll tell you what I did, though.
I put some buy limit orders in there on the very, very low range. Is it at $0.10? $1? $10? Who knows what the next one will drive the price down to. But personally, I think it'll happen again. But this time, I want to be part of the action.
Full story here: http://www.cnbc.com/2017/06/22/ethereum-price-crash-10-cents-gdax-exchange-after-multimillion-dollar-trade.html