How Can Derivatives Trading on an Exchange Be Affected by a Successful 51% Attack?
A successful 51% attack, particularly a double-spend, can cause extreme volatility and price manipulation on the exchange. If the attacker deposits coins, sells them (potentially shorting futures/options), and then reverses the deposit transaction, the exchange suffers a loss and the market is destabilized.
This sudden, artificial price movement can trigger massive liquidations in futures and perpetual contracts, leading to significant systemic risk for the exchange and its users. The integrity of the underlying asset's price is compromised.
Glossar
Price Manipulation
Deception ⎊ ⎊ Price manipulation within cryptocurrency, options, and derivatives markets involves intentional actions designed to create artificial movements in the price of an asset, deviating from legitimate supply and demand forces.
Extreme Volatility
Momentum ⎊ Within cryptocurrency derivatives and options trading, extreme volatility manifests as a rapid and sustained acceleration of price movements, often exceeding historical ranges and predictive models.
Massive Liquidations
Cascade ⎊ Massive liquidations, within cryptocurrency and derivatives markets, represent a systemic risk event where an initial price decline triggers forced selling across leveraged positions, accelerating the downturn.
Derivatives Trading
Leverage ⎊ Derivatives trading, within cryptocurrency, options, and financial markets, fundamentally represents a contractual agreement where value is derived from an underlying asset, enabling amplified exposure without necessitating outright ownership.
Systemic Risk
Contagion ⎊ Systemic risk within cryptocurrency, options trading, and financial derivatives manifests primarily through interconnectedness, where the failure of one entity can propagate rapidly across the system.