In brief
- Circuit breakers prevent panic selling on Wall Street, but some experts feel they are impractical, and potentially dangerous, in decentralized finance.
- DeFi protocols will always be open, even if “front ends” implement restrictions, Amanda Tuminelli of the DeFi Education Fund said.
- They could cause price dislocations to become worse, Gregory Xethalis of Multicoin Capital said.
Cryptocurrency prices plummeted last Friday as cascading liquidations fueled historic volatility, yet some experts are saying that Wall Street’s old-school safety net wouldn’t have helped.
In the U.S., venues like the Nasdaq and New York Stock Exchange have used circuit breakers to promote orderly trading since 1988, following the stock market crash known as Black Monday. They found that investors needed more time to react to changing market conditions.
In traditional finance, a “timeout” may reduce panic selling, but following more than $19 billion in crypto liquidations last Friday, some experts insist that those safeguards don’t map cleanly onto
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Author: André Beganski
