Why does the spread between two crypto assets stretch and contract? 🤔
🔹 News or a sudden wave of hype around one coin moves it much faster than the second, stretching the spread.
🔹 Large individual trades and mass position closures also create temporary price imbalances.
🔹 Some of these imbalances smooth out over time, but not all of them return to normal.
🔹 Spread expansion can be simple market noise, or it could mean the connection between coins is breaking.
💡 Example: Coin A jumps 8% on project news, while Coin B gains 2%. The spread stretches. Next, Coin A might pull back to contract the spread, or it stays at the new level.
⚠️ Common mistake: Treating every spread expansion as an opportunity without finding out what caused it.
What will you check first when you see a sharp spread expansion?
#Futures #CryptoTrading #CryptoEducation #RiskManagement
🔹 News or a sudden wave of hype around one coin moves it much faster than the second, stretching the spread.
🔹 Large individual trades and mass position closures also create temporary price imbalances.
🔹 Some of these imbalances smooth out over time, but not all of them return to normal.
🔹 Spread expansion can be simple market noise, or it could mean the connection between coins is breaking.
💡 Example: Coin A jumps 8% on project news, while Coin B gains 2%. The spread stretches. Next, Coin A might pull back to contract the spread, or it stays at the new level.
⚠️ Common mistake: Treating every spread expansion as an opportunity without finding out what caused it.
What will you check first when you see a sharp spread expansion?
#Futures #CryptoTrading #CryptoEducation #RiskManagement