Goes to show how little I know about how the system actually works.
Well, obviously it depends on the spread, right? The wider the spread between the bid and ask, the bigger the slippage will be. In those instances, you'd be doing a favor to both buyers and sellers if you constantly use market orders.
Have you ever heard of "crossed market"? A crossed market occurs when the bid price is higher than the ask price and vice versa with the ask being higher than the bid. I saw a few of those back in the 90s when everything was pretty rudimentary. But now with all these sophisticated technologies, you would be hard pressed to see one. Anyway, I think most exchanges ban such a practice.
In a volatile market, expect some big slippages.The same reason anyone wants the market to drop. So you can accumulate more shares.
I wanted to come back to this post because I came across a nice post which shows the resting orders at several exchanges.
But then again, as I've already stated in the past, you have arbs working on all these different markets to exploit any possible price disparities. Even if BitMex is thinly traded, it shouldn't have fallen as much as it did. Otherwise, it would have gotten scooped up by these arbs. If I had to guess, I would say the crash was due to the glitch in their software than the trading volume.
I think your talking point is more aligned with spoofing than crossed market. If you wanna bring the price down, you put in bunch of fake orders that you have no intention of executing. Well, just don't get caught because spoofing is illegal.
Since you state that arbs should be lessening this drop, and it clearly dropped, then it means the arbs aren't working, or are non-existent. You think its a glitch, but I just think its that this is a difficult market to control. This isn't like futures which trades at 1 exchange. Every one of these bitcoin exchanges would need to have a whole team with lots of bitcoin ready to put into motion in order to sell to keep price down, or with lots of cash waiting to buy in order to prevent a collapse.
About a decade ago I found out that the resting orders in the matrix are probably far from accurate. Some futures trading platforms allow you to “sand bag” orders for multiple contracts. Example: I place an order to sell 50 SN24 at 1220. There is an option to choose how many of the 50 will show on the exchange matrix (You can choose from 1 to 50 in this example). I don’t know the mechanics of how it works but I would guess that the sand-bagged orders are only held on the platform servers and not on the exchange, they would get sent to the exchange as the market buys each individual contract at that price (assuming I choose to only show 1 contract). The downside for me would be that the remaining 49 contracts could be last in line to get filled at my price. If I didn’t sand-bag, all of the contracts would be together time wise. Ever since learning about this option I started viewing the matrix numbers as the number of accounts with orders at that price, not as the number of actual contracts offered. I don’t know if this option exists anywhere else though.
This sounds exactly like an iceberg order. What you see, the ice above the water, is tiny compared to what is below the water. So whatever quantity is shown will fill, and then it gets added back on. But just like you say, it means you're last in line. But really, the amount of contracts that trade vs. the amount sitting as a limit order is probably like 1:10. (ie. 50 contracts shown across several levels, but 500 trade over the course of a few seconds). These algos are doing so much on the micro second time frame that it doesn't make sense for us to try and figure it out.
