Circuit breaker
What is a circuit breaker, and why does its absence matter when crypto venues never close?
In plain words
A circuit breaker is a rule that briefly halts trading on an exchange after a price moves too far in too short a time. It gives participants a pause to reassess. Spot crypto venues generally run without such pauses, so trading continues through large moves.
Why it matters
A pause can interrupt panic selling or buying and let orders re-form at calmer prices. Without one, a fast move can run its full course in minutes, and stop orders, liquidations and market sells all execute against thinner liquidity, often making the fall deeper than it would be on a paused venue.
In a real week: BTC, week of 12 April 2021
In the week of 12 April 2021, BTC ranged 27.34% from a high of 64854.0 on Wednesday 14 April 06:00 UTC to a low of 50931.3 on Sunday 18 April 03:00 UTC. Its largest hourly move was -6.44% at that same Sunday 03:00 UTC hour, and its worst day, 18 April, closed -6.43%. Volume ran 1.29 times its prior 12-week average, at 33.22 billion dollars, across the whole week.
A common mistake
Assuming a sharp fall would be stopped by a circuit breaker. Spot crypto venues generally have none, so a large move can complete in a single hour.