Cryptocurrency market’s recent rise continues to attract investor attention, but it also leads to several adverse situations. Ivo Crnkovic-Rubsamen, strategy manager and technical officer at the dYdX exchange, gave an exclusive interview regarding the recent outages at some of the world’s largest centralized crypto exchanges, citing algorithmic trading firms as the main cause.
Bull Market and Centralized Exchanges
Some of the leading exchanges, including Binance, Coinbase, Kraken, and Bybit, experienced technical issues last week, just days after Bitcoin surpassed $60,000 on February 28 for the first time in over two years. Ivo Crnkovic-Rubsamen commented on the issue:
“Due to high investor interest and rapid price movements, all algorithmic trading firms significantly increase their order submission and cancellation rates to the matching engine to protect their positions. It’s common for a trading firm to increase its order and cancellation output by 20 times during peak times. We see this in almost every bull market or whenever there’s intense investor interest and significant price movements.”
Following the temporary outage, investment research firm Citron called for short selling of Coinbase shares. According to Google Finance data, Coinbase shares have risen over 11.36% in the last 24 hours, trading at $229.15.
Noteworthy Statements from a Prominent Figure
According to Crnkovic-Rubsamen, unlike decentralized exchanges, some centralized exchanges can set special trading limits for individual market makers based on trust assumptions, which can contribute to the increased workload during bull market conditions. Rubsamen commented on this issue:
“Centralized exchanges might have a well-known market maker and can set their rate limits 10 times higher, which is quite reasonable. However, when the bull market comes, and this market maker wants to trade 10 times faster on PEPE, suddenly having much higher rate limits for them becomes a problem.”
In contrast, rate limits on decentralized exchanges are determined by the protocol, as DEXs do not have a direct relationship with market makers. Rubsamen added that centralized exchanges can be highly reliable during normal trading operations, but may be less reliable than DEXs during the heaviest bull market loads.
