Disruptions to Binance and Coinbase caused by Traders with Algorithms

Recent outages at the largest centralized crypto exchanges, Binance and Coinbase, are mainly caused by the increased activity of algorithmic trading companies.

This is what Ivo Crnkovic-Rubsamen, the chief strategy officer at dYdX, said in an interview that rapid price movements and growing interest from retail investors are leading to a huge increase in order placements and cancellations by these companies. The analyst said this in conversation with Cointelegraph.

Disruptions during peak loads are nothing new. We see this in many digital companies. From the games industry with a new release to crypto exchanges.

Crnkovic-Rubsamen: “Because there is so much interest from retail investors and the price action is so high, all algorithmic trading companies are dramatically increasing the rate of order placements and cancellations that they want to send to the matching engine to maintain their positions. It is common for a trading firm to multiply the output of orders and cancellations by 20 during a very busy period.”

Increase in Trading Volume on Exchanges
In addition to the problems at centralized exchanges, recent regulations by the US SEC against Binance and Coinbase have led to a significant increase in trading volumes on decentralized exchanges (DEXs). Within 48 hours of the legal actions, the three largest DEXs saw a 444% increase in their trading volumes.

This underlines the growing appeal of DEXs, especially in times of legal uncertainty and technical difficulties in centralized platforms.

Influence on Price and Market Liquidity

The disruptions and increased activity also have consequences for market prices. Bitcoin reached a high of $64,100 on Coinbase but suffered a sharp decline after technical issues and mass liquidations, highlighting the fragility and volatility of the market under current conditions. The price has now reached a new all-time high.

Recent events underline the complexity and dynamics of the current crypto market, with both technology and regulations still evolving. While centralized exchanges struggle with technical and legal challenges, DEXs offer an alternative that, while not without its own problems, is playing a growing role in the crypto world.

Analysis: These developments demonstrate how the crypto market continues to evolve and adapt to new challenges, with technology, legislation and market behavior closely intertwined.