The cryptocurrency market is very unstable, and there are often times of panic and uncertainty. In these situations, an investor might want to pull out their investments, even if they are very large. If an investor makes a decision without enough information, it could hurt both their strategy and the crypto markets. Iceberg orders come in at this point.
An iceberg order is made by a market player who does a series of transactions in a methodical way while following a logical and strategic plan. For the sake of simplicity, we can think of an “iceberg order” as a large trading order that has been broken up into several smaller ones. It is easier and more profitable to send out a lot of small orders than to dump a big one. It’s like how you can only see the tip of an iceberg.
Think about the cryptocurrency market and an investor who needs to buy or sell 50,000 Bitcoins. Since every transaction is written down on the blockchain, the order books will always show the full amount. A transaction of this size would also be bad for the cryptocurrency market as a whole.
To fix this, the investor needs to break up that same order into smaller pieces. This won’t make traders and investors freak out. When the order is processed, the other people on the market don’t know about it.
Why is Iceberg order essential in Crypto?
People with a lot of cryptos in their wallets, called “crypto whales,” are always watching the markets for a chance to buy or sell. If they buy or sell a lot of coins, these people can really mess up the market.
It is also known that the pump-and-dump strategy can affect the price of any one cryptocurrency, which then affects the market as a whole.
Moves like this are padded by iceberg orders. They make it possible to move large orders without affecting the whole market. This is a very important way to make sure that small retail investors don’t lose money and that panic doesn’t break out. Iceberg orders also bring stability to volatile markets.