Why Matic’s Steep Plunge Should Serve as Warning Against Any Small Cryptocurrency | NewsBTC

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Matic, a cryptocurrency known to have an active and supportive community, plunged by more than 50% on the day and over 70% at the day’s lowest point. But, such a drop can occur to any minor crypto asset.

According to global markets analyst Alex Krüger, large hands can adjust the selling volume of a cryptocurrency, causing it to demonstrate extreme volatility in a short time period.

“What happened with MATIC can happen to any token. It would be very surprising for it to happen to the large caps, but it can still happen. Adjust selling volume by market cap or order book liquidity, and presto. Hence why crypto is Traders’ Paradise, Investors’ Hell,” he said.

Low volumes, high leverage trading

Even bitcoin, which has a market capitalization of $133 billion, is often subject to 10 percent movements in a span of hours due to short and long squeezes.

In trading, a short or a long squeeze occurs when a cascade of short or long contracts get liquidated, pushing the price down or up in a massive boost in volatility.

“Bring bigger whales to the fray and BTC could experience something similar. When big whales show up liquidity evaporates. Already happened mid-May in smaller scale. That’s the nature of the best for unregulated markets with fractioned liquidity,” noted Krüger.

When a small cryptocurrency with low liquidity meets higher risk trading options like margin trading, it can cause significant price movements in short time frames.

Panic from big cryptocurrency traders

Changpeng Zhao, the CEO of Binance, said that the sudden drop of Matic was likely caused by a panic move by several big traders.

“Our team is still investigating the data, but it’s already clear that the MATIC team has nothing to do with it. A number of big traders panicked, causing a cycle. Going to be a tough call on how much an exchange should interfere with people’s trading,” he said.

As Zhao said, it is difficult for an exchange to evaluate the extent in which it gets involved in market making, if at all.

If it was some big traders with large capital that triggered the the major pullback, it demonstrates serious liquidity problems of even some of the largest alternative cryptocurrencies in the market.

Prior to the drop, the valuation of Matic was hovering around at $100 million, in the top 50 spot.

Matic cryptocurrency drop

Matic COO says it did not play any role in the abrupt fall of the cryptocurrency

The Matic team has denied that the 70% decline of the cryptocurrency was caused by the team’s sell-off.

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Disclaimer: This press release is for informational purposes only, the information does not constitute investment advice or an offer to invest. The opinions expressed in this article are those of the author and do not necessarily represent the views of CriptomonedaseICO , and should not be attributed to, CriptomonedaseICO .

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