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[freepik](https://www.freepik.com/premium-ai-image/many-bitcoin-stack-red-arrows-down-bitcoin-value-rising-down-btc-price-fall-drop-concept_155315089.htm#fromView=search&page=1&position=20&uuid=87488b22-abcf-4724-9781-57b00ea171e9)|
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Hi friends! how are you doing? Welcome to my blog, it's super good to be back in your faces. I trust you got value from my last post. I bring to you another interesting content one that I believe you would find interesting as usual. In my previous post, we explored the concept "Group Mining and benefit", you can check out my blog to read through if you haven't.
Today, we would be looking at *Flash Crash** in the crypto world... it's actually another topic of interest that I feel many can relate with. You must have encountered such in the market at some point or the other if you have been around this terrain for long. Anyway we are going to delve deeper into it.
|**Introduction**|
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The market is characterized with a rising and falling cycle, we have seen this happen again and again. There are traders or investors who love it when there asset value rises in the market , we call them the bulls and then we have those who profit from the fall of the market, we call them bears.
The fact is we need both players in the market, it's their activities that brings balance into the market, making it healthy and fair. Although there are sometimes we have some kinds of manipulation in the market which tends to make price fall leading to a sharp or gradually collapse of the market.
There are other times a crash is as a result of some other factors which of course we would be discussing in this lesson. Just sit back and enjoy this ride with me....ya ready? Leggo....
|**What Is a Flash Crash**|
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Flash Crash is an event that occurs in the market, a situation where the price of asset falls rapidly and drastically and then recovers shortly after the crash.
This happens both in the traditional market and in the crypto market.
The term flash there is used to define the nature of the crash, a flash connotes something short and temporal.
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|[freepik](https://www.freepik.com/free-vector/bankruptcy-concept-with-arrow_7473202.htm#fromView=search&page=1&position=3&uuid=87488b22-abcf-4724-9781-57b00ea171e9)|
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This is the same with what happens in the market when a flash crash occurs. The crash could affect the entire asset in the market or just some set of assets and this spans for, minutes, hours at most and not usually days or month...since it not a winter event that could be prolonged. In other words, it's a very short term event.
While this is true that it a short term occurrence in the market, it's important to mention that it could lead to a lot of loss for small investing who were caught in it web. A flash crash could be triggered, which sends price crashing down, investors in a bid to salvage the situation joins the sell off even at loss and then the market sharply returns to it original state like nothing happened.
|**Caused of Flash Crash**|
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• **Sell Offs by Whale:** Sell off by high volume traders like whales could lead to flash crash. When they decided to sell of their asset, the market has no choice than to be distorted. This singular act even multiplies the effect of the sell off in the market such that other investors follow suit and then further push the price down.
Then the miracle happen shortly after the price crashes, it recovers and balances up like nothing happened. This is what we call market correction. Surely, the market has a way of balancing everything within that short period of time it happened which usually do not span more than a day.
• **Glitches:** Flash Crash could occur as a result of some factors such as power failure or outage just as in the case of Bitcoin in year 2021. Report has it that it suffered a flash crash that cost it $310 billion simply because there was power outage in Xinjiang, a place notable for the world largest bitcoin mining farm. This singular occurrence impacted on the price of Bitcoin in the market just as the price stat has shown.
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|[freepik](https://www.freepik.com/free-vector/hand-drawn-bankruptcy-concept_7733894.htm#fromView=search&page=1&position=13&uuid=38001f01-3f9f-41d3-be9c-b5b2babf2872)|
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There are other example and record of flash crash that took place in the past both in the traditional market and the crypto market. We have mentioned that for Bitcoin. Ethereum also experience one of such in 2017. This crash was triggered by an intentional massive sell-off, pushing the price of Ethereum from $317.81 to $224.48 but it was corrected again shortly after.
The market recovery is actually the good thing about a flash crash, in some cases, the market recovers in minutes, some hours, it usual do not exceed a day, if you weren't in the market, you wouldn't even know something that huge had happened, you would only get to hear after the quick correction.
|**Can Flash Crash be Prevented?**|
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This is a very vital question. Well the answer is a partial yes. If you considered the factors that leads to a flash crash, you would see we have the high volume traders and then glitches. It is quite impossible to dictate to an investor when he should sell his asset, he might wake up one day and decide to sell part of all...so you see, we can't really control this aspect.
We can only control the other part that leads to the crash. Moreso exchange can set up parameters that stops trading activities when price of asset falls below certain level in the market just to contain the situation. It has to be something automatic and well programmed to detect and stop trading activities when price drop below certain threshold.
|**Bottom Line**|
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I believe by now we understand what Flash Crash is how it impact in the market. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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