Fat Fingering Trades and Stock Crypto Inversion
By Nicolas Abington | Crescent City Capital Market Analyst Intern
If you were watching the S&P 500 yesterday, you probably noticed a flash crash that took place at 10 am and lasted for about 45 minutes. During this time period, the S&P 500 dropped approximately 1.24% and proceeded to pick back for the rest of the day. There has been little response to the flash crash, much less reasoning behind it leaving people to believe that this was caused by fat fingering from institutional investors. A fat-fingered error is a computer-related input error where the trader puts in a buy or sell order is placed for far more than intended, for the incorrect contract or stock or with any other feasible input errors.
These types of occurrences happen often but the reason we are focusing on this one is due to its correlation with crypto assets. During the same time period, there was a sell-off in the crypto market that exhibited a 4.4% decrease in the total market cap. I’ve written a couple of different articles about the inverse correlation between cryptocurrency and the stock market. To have the decreases correlate with each other can quickly be thought of as an anomaly since the sample size of this occurring is one but there is potentially more to it than that.
Both markets were acting in an irrational manner of seeing a large sell-off and due to the lack of a fundamental basis for the trades, traders reacted differently to the trend. These caused sell-offs in both markets and after the frenzy had concluded, the market began to build up for the rest of the trading day.
A potential new trend? More than likely not but as we continue through these next turbulent months we have to track every piece of data we can even the anomalies. The Bitcoin halving, regulation, and adoption should be the biggest things on the crypto community’s minds but the day to day provides the opportunity to enhance our trading toolbox.
Sources:
https://www.tradingview.com/symbols/SPX/
https://coinmarketcap.com/charts/