Invest: Some concerns about crypto

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A famous function of brokers in traditional finance is not answering the phone when the market crashes. This has various benefits and costs. If you are a customer and the market is going down and you see that and panic and decide to sell everything, you will call your broker, and she will not answer her phone. You will be unable to sell everything. This may protect you from selling at the bottom (though it may make things worse for you if this is not in fact the bottom), and will definitely protect the market from you adding your sales to the general march downward. On the other hand if you bravely decide to step in to buy the dip, your broker’s failure to answer the phone not only costs you money (if you correctly time the bottom) but also prevents you from stepping in to stabilize the market; if brokers don’t answer when buyers call then the crash gets worse.

There is also the issue of margin calls. In general, if you have a trade on using money that you borrowed from your broker, and your broker calls you for more money, and you call her back, she will answer that call, because she does want your money. But in particularly frantic market conditions she may not — because she has too much else going on, or because she has preemptively liquidated your position rather than waiting for you to post more money. And that too may drive the market lower.

Of course this is all old-timey stuff and modern markets are considerably more technically advanced; the role of stabilizing markets by not answering the phone has been taken over by Robinhood having its app and website break (and also not answering the phone). Even that approach feels a bit dated, though, and with the rise of crypto and blockchains and decentralized finance there are new, cutting-edge, cryptographically elegant ways for trading not to work:

Solana, one of the largest blockchain networks, was hit by instability during a turbulent week for cryptocurrencies. …

The issue experienced by validators that use their computing power to help verify the network was caused by excessive duplicate transactions, according to a notice on the Solana website dated Jan. 22. Engineers have released version 1.8.14, which “will attempt to mitigate the worst effects of this issue,” the notice said. It added that more improvements are expected to come out in the next eight to 12 weeks, and many of those features are being “rigorously tested.” 

“Solana mainnet beta is experiencing high levels of network congestion,” the notice said. “The last 24 hours have shown these systems need to be improved to meet the demands of users, and support the more complex transactions now common on the network.”


Solana’s network logjam has had ramifications across the crypto-ecosystem. Not only does it make it difficult for a retail market participant to, for instance, sell a Solana-based NFT, it also slows down large DeFi traders and forces them to work around the network. “Slows everything down,” one trading executive said. 

For large traders moving tens of millions, they have to move activity over-the-counter and agree to settle once the chain is working. “Agree on a price now and settle later… CEXes are still working so you still have price discovery,” an executive at a derivatives trading desk noted. 

Others traders complained about not being able to top off a leveraged position in Solana on a decentralized venue — meaning, add to their position before risking liquidation. 

Also if you thought this month has been bad for meme stocks, what about meme cryptocurrencies?

Virtual coins made popular by online hype, including Dogecoin and Shiba Inu, were among the biggest losers in weekly value on Friday as crypto majors Bitcoin and Ether slid below key support thresholds.

Dogecoin fell as much as 24% in the most recent seven-day period, tumbling more than 12% on Friday alone to a low of $0.148, according to data from CoinGecko. The meme coin is now down almost 80% from its all-time high, recorded nine months ago ahead of prominent supporter and Tesla Chief Executive Elon Musk’s appearance on “Saturday Night Live.”

Other coins inspired by the shiba inu dog breed, including Shiba Inu and Dogelon, slipped around 18% in the last week. However, outlier Baby Doge rose a fifth in value over the same period.

It is very important for my sanity that I never learn why Baby Doge was up last week, or anything else about Baby Doge.


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