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What Is the Risk of a “Flash Crash” in the Underlying Asset Price Affecting an Oracle Feed?

A flash crash can cause an oracle to report a depressed price, potentially triggering unwarranted liquidations, especially with spot price feeds.
Greeks.Live21.11.25

What Is the Risk of a “Flash Crash” in the Underlying Asset Price Affecting an Oracle Feed?

A flash crash, a sudden, rapid drop in price followed by a quick recovery, can cause an oracle to report a severely depressed price, even if the market quickly corrected. If a spot price oracle is used, a flash crash can trigger unwarranted liquidations in lending protocols.

Even TWAP oracles can be affected if the crash persists long enough to be included in the average, though the impact is usually smoothed.

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