Post
Topic
Board Trading Discussion
Merits 1 from 1 user
Re: Why does such a sudden price spike happen?
by
Wapfika
on 14/09/2024, 15:18:07 UTC
⭐ Merited by irhact (1)
This isn't something new of course, I have seen it many times but I don't really understand why such spikes happen. Why would someone pay $1 on Matic when he or she could buy tons of it for only $0.39?

Short answer due to the thin liquidity on the orderbook.

This kind of price fluctuations occur if a huge market order was initiate while the orderbook doesn't have enough liquidity to absorb it. This cause a temporary price fluctuations that later on correct since the market maker will fill again order on the orderbook to correct the price.

This is common on tokens that has a surge volume of buyers that want to guy first or some deep pocket trader use market order in panic while they use a huge capital.