Competition Among Crypto Traders Gets More Aggressive By DailyCoin


Competition among crypto traders is getting more aggressive

  • In a crashed and competitive crypto market with declining profits, some traders are turning against each other.
  • Attacking other traders’ trading positions that are about to be liquidated has become a daily mission for many players.
  • This dangerous arbitrage strategy is precisely one of the causes of the crisis of several DeFi companies like Celsius.

Competition in the cryptocurrency market is becoming more aggressive as profits fall due to collapsing prices and trading in crypto assets becomes more difficult.

Traders are turning on each other and scouring the blockchain for key information to track the movements of their drivers, especially those with high leverage positions, a contributor to the decentralized crypto exchange Suchi, who goes by the pseudonym Omakase, revealed to Bloomberg.

After studying other traders, these sharks attack their positions and push them into liquidation in order to obtain bonuses that are often offered to their clients by decentralized finance (DeFi) platforms, which offer free intermediaries for trading and cryptocurrency loan.

Arbitration crushes stock exchanges

Behind the downfall of TerraUSD could be shark traders. These players took advantage of price arbitrage between the Curve platform, a decentralized exchange responsible for the stablecoin’s collapse, and centralized exchanges, according to blockchain analytics firm Nansen.

Arbitrage is a financial strategy applied to cryptocurrency trading that consists of taking advantage of the price difference between different markets on the same token to obtain advantages, almost without risk.

US cryptocurrency lender Celsius Network’s troubles started right when traders started using price arbitrage to get rewards. When the price of the tETH token fell, it also affected Celsius due to the fact that the company has large positions of this Ether-pegged crypto.

“As stETH goes down, arbitrageurs buy stETH and sell ETH against it, sending ETH lower, again lowering collateral values ​​on DeFi,” Celsius aggravates, Arca said in a recent note, as the platform could not return the money to its users.

“In a downtrend environment, where returns are more difficult to access, what we’re going to see is some players using more aggressive strategies, and that may not necessarily be good for the community,” he said. explained Omakase. He added: “The environment has become more player versus player.”

on the reverse

  • The collapse in cryptocurrency prices has made leverage or margin trading a huge danger to businesses themselves.

At one point, crypto exchanges even offered their users this type of trade with up to 100X. In other words, they could borrow money up to 100 times more than the money deposited as collateral.

However, DeFi firms are now asking users to over-collateralize (repay) and borrow less money than they invest.

When a trader discovers that another may be liquidated, he buys and accumulates a certain amount of a token. He then sells it by pressing his price drop while getting the reward offered by the platform to liquidate the other trader.

Liquidation occurs when a position does not have the necessary funds to keep a leveraged trade open. Once liquidated, the exchange closes the position and the trader therefore loses only part of the invested assets.

“Most protocols offer a 10-15% liquidation fee,” says Omakase.

“Triggering enough sell-offs would cause a cascade of sell-offs where a motivated player might just go short in order to take advantage of the subsequent secondary drop,” he explained. Margin trading has become a very lucrative business. Some traders use bots that follow others just when they are about to be liquidated. After liquidating them, they receive the reward.

Liquidations are not always continuous or of high value, so traders have to bide their time to catch a sufficiently profitable one. But other times many come at the same time and some are very big, these are the ones that leave a bigger profit.

The battle between traders is over for who accelerates the liquidation operation. Traders reject the fact that margin trading is referred to as “attacks”. They claim that this type of operation is essential for the loan market and to protect the protocol from insolvency situations.

Why You Should Care

  • This type of highly competitive and voracious market is growing in these critical times for crypto finance, which is why it has become so tempting.
  • In this regard, Omakase advises traders: “In general, everyone should stay safe, everyone should avoid using leverage.”

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