What is Flash Crash?
Let's find out Flash Crash meaning, definition in crypto, what is Flash Crash, and all other detailed facts.
When the price of an asset drops drastically in a short period of time and then returns to the previous levels in the same amount of time it is referred to as a flash crash. In the cryptocurrency world, a flash crash can last from hours to minutes. Such flash crashes usually happen because of high-frequency trading.
Extreme downward price swings are a natural part of the volatility of digital currencies. As a result of the intense selling pressures, crypto values experience quick changes, resulting in flash crashes in many situations.
However, other industries, such as the stock and foreign exchange markets, also experience flash crashes. The July 2015 flash, when an effect on the New York Stock Exchange (NYSE) halted trading for over three hours, was one of the most notable stock market hits. Other examples include the 2014 bond flash crash, which was triggered by algorithmic trading systems, and the 2010 Dow crash, which was triggered by spoofing.
In the crypto world, flash crashes are triggered differently. For instance, in 2021, Bitcoin suffered a flash crash which wiped out around $310 billion from the digital currency market causing BTC liquidations worth $10 billion.
This flash crash occurred as a result of blackouts in the region of Xinjiang in China, which is a place where some of the world’s largest Bitcoin mining farms are located. According to further research, nearly half of Bitcoin’s network outages were caused by power failures in this area, dropping the number of cryptographic hashes per second from 215 to 120 and causing a large selloff.