ACT Flash Crash: Binance’s Sudden Leverage Limit Change Sparks 50% Plunge

On April 1st, a significant market disruption was observed as the cryptocurrency ACT suffered a flash crash of 50%. This sudden decline was triggered by Binance’s adjustment of the leverage position limit for ACT, restricting individual leverage positions to a maximum of $4.5 million. Consequently, several market makers, exceeding these new limits, faced liquidation at prevailing market prices. Following this, discrepancies emerged between the contract and the spot prices, leading to an additional crash in the spot market.

The announcement regarding the limitation changes surfaced at 15:32 on the same day, leaving traders with a mere three hours to react. Notably, just the day prior, Binance had indicated modifications to ACT’s position limits, implementing yet another 50% reduction on April 1st. Industry experts urge Binance to enhance its assessment protocols to preemptively address potential liquidations and improve communication regarding significant adjustments, reflecting their role as a leading cryptocurrency trading platform.