How Do Crypto Exchanges Use ‘Circuit Breakers’ to Manage Volatility Caused by Large Orders?

Circuit breakers are automated mechanisms that temporarily halt trading or widen the price bands when the price of an asset moves beyond a predefined threshold in a short period. This is often triggered by large, market-moving orders.

The halt provides a cooling-off period, allowing market participants to reassess the price and for liquidity to replenish, which helps prevent a cascading effect and reduces the potential for extreme, volatility-driven negative slippage.