A POST ON CRYPTO MARKET CRASHES
In Tradfi you have regulated market makers, who are legally and contractually required to provide liquidity / make markets.
For example:
NYSE Designated Market Makers (DMMs): assigned specific stocks and contractually required to maintain orderly markets. This includes posting continuous two-sided quotes within defined parameters, even during volatile periods, under SEC and NYSE rules.
Nasdaq Market Makers: must register with FINRA and are obligated under Rule 4613 to provide continuous quotes within a maximum spread. They can’t just “disappear” without regulatory penalties or loss of their market-making status.
In cases of extreme volatility these market makers can widen spreads or temporarily halt quoting, but outright withdrawal is heavily restricted and penalized.
In crypto, market makers have no regulatory or contractual obligation to provide liquidity. During crashes, they can and do withdraw, leading to massive liquidity gaps and amplified price drops.
THIS MUST CHANGE