Ethereum flash-crash, explained!

During the night of the 21st of June Ethereum dropped hard for just a few seconds. How did this happen and what were the results of this?

As you can see on the picture below, the price went down very strong for just a very short time, some trading platforms have recorded trades of under 0.1 USD per Ether. If you were that guy buying Ether at that price, you're most likely multi-millionaire now. For all those who sold at 0.1 USD, make sure to check your stop loss-orders better in the future please.

With that being said, here is what happened. Just before this huge drop someone put a sell order for a multi-million dollar hold in Ether. Because he did put this order up without a limit, the market searched for counterparties willing to buy at the highest price. The first bit of Ether were sold at around 330 USD per ether, but once all those counterparties bought their ether the next ones were fulfilled at a price a bit lower than 330 USD. This continued up until the last Ethers of the enormous sell order were sold at a price of 224 USD per Ether.

At that point the market price dropped to 224 USD just because of 1 huge sell order. That drop in the market price caused a chain reaction. Because, a lot of people that did hold ether had put up a stop-loss-order that makes the exchange automatically sell their Ether once the price goes under a specific amount. So after that first big order was fulfilled another 800 orders were trying to find counterparties to sell their Ether to at the best price possible. This enormous amount that's being sold at once wiped out all the buy-orders up until the orders that were placed to buy Ether at 0.1 USD. This is why the price dropped all the way down to 0.1 USD for a split second.

My recommendations for you if you are trading anything with stop-loss-orders is to place them correctly with a minimum selling price to protect yourself from selling ether at rock bottom prices. So please go and check your orders for all your currencies, because this can not only happen to ethereum, it can happen to all coins.

The result of this crash is that Ethereum has lost some more of its value after getting back up. Because people don't really know what happened and got scared, selling their ether and putting it in different currencies. This might NOT be the right move, just because this just happened. Now that this crash happened, all the ancient stop-loss orders that were placed at ridiculously low prices are gone now. Which means the market cleared itself from all those old orders, which means it won't happen again in the near future, at least not for Ethereum.