Someone could potentially buy second largest cryptocurrency on market with 15% discount
Once again, Ethereum plunged massively due to lack of liquidity on the Uniswap decentralized trading platform, as anonymous investors traded almost 1,300 ETH for $1.1 million in the trading pair.
This is not the first time Uniswap faced issues with liquidity. Recently, the WETH trading pair fell to $950 despite the average market price of Ether being far above $1,000. The main reason behind it is the lack of liquidity on Uniswap because of its decentralized nature.
Liquidity on the trading pair is provided by other users who receive rewards for it. The market making process is controlled by the AMM system. Unfortunately, it sometimes cannot cover the existing demand from large investors.
Some cryptocurrency whales used the lack of liquidity to their advantage by pushing the price of the wrapped asset lower than the market offering and then purchasing the asset with a massive discount, which is almost impossible to do on large centralized exchanges like Binance.
Unfortunately, lack of liquidity is not a good thing if someone is selling or buying a large volume of coins or tokens for long-term holding and not for speculation or price manipulation. The $1.1 million traded was probably not used to drive down the price of an asset, but to fund a loan or deleverage a position.
At press time, Ethereum trades at $1,110 and bounces off the $1000 threshold, which could have ramped up the price to dive by another 10%. Previously, U.Today mentioned that Ethereum has strong grounds for a short-term reversal, according to the technical indicator.