Price dislocations between futures and spot markets led altcoins like ETH, LTC and SUSHI to trade up to 43% below their index price in spot markets.
Traders have become accustomed to perpetual futures markets trading pretty much in line with the regular spot markets. After all, there are incentives for arbitrage desks to buy those contracts at a discount.
However, during periods of extreme volatility, market makers typically are not able to meet the demand. This movement could happen due to connectivity problems with the exchanges serves or the market makers’ lack of funds to add more positions.
While these situations are rare, today’s performance was nothing short of unusual as some altcoins dropped by 30% or more. This movement caused anomalies on futures contracts, which created a buying opportunity for those savvy enough to take advantage.
The perpetual futures price gap did not trigger liquidations.
It is worth noting that users were not harmed by the price difference as liquidations are triggered by the index price, which is an average from multiple spot exchanges. Thus, even if the perpetual futures trade below the reference, the automatic stop orders are not triggered.
As one move to less liquid altcoins, the situation tends to get worse. This is caused mainly due to light orderbooks, fewer market participants, and less interest from market makers due to lower volumes.