Binance, one of the world’s biggest cryptocurrency exchanges, said it would consider new marketplace controls after a single large order apparently triggered a flash crash early Friday in polkadot (DOT) trading contracts.
Prices for the quarterly perpetual-futures contracts on polkadot were trading around $33.25 right around 1:45 coordinated universal time (8:45 p.m. EST), when suddenly they tumbled 99.2%.
The contracts fell as low as $0.25 in less than a minute, before quickly bouncing back to around $33.
In just that single minute, some $18 million of the contracts changed hands on the exchange.
“A user, who held a large position, put a single stop market order in the market, which triggered this needle,” a Binance representative told CoinDesk in an email. “It didn’t affect any other users’ positions as we are using mark price for liquidations.”
“We will add more controls of stop market order size limits to prevent a similar recurrence,” the representative added.
While the futures market flash crashed, the cryptocurrency held steady near 33 USDT in the spot market, Binance’s data shows.
These “coin-margined” perpetual futures are products margined and priced using a cryptocurrency, such as bitcoin, instead of the dollar (fiat).
A stop market order is an order to buy or sell a stock at the market price once the user-decided stop price is hit.
In this case, the user was holding a large position that exceeded the total available bids in the market, according to the Binance representative.
Polkadot is a blockchain network that supports various interconnected sub-blockchains called parachains, designed to provide a higher transaction throughput than the leading Ethereum network.
The Polkadot network’s DOT token is one of this year’s hottest cryptocurrencies, quadrupling in price already in 2021, for a market value of more than $30 billion. The Wall Street firms Goldman Sachs, JPMorgan and UBS are even reportedly trading exchange-traded products linked to DOT on a Swiss exchange.