The starting point of circuit breaker mechanism is good, which can protect the interests of small and medium-sized investors in the digital money market and prevent them from greater losses. However, the circuit breaker mechanism is difficult to implement in the digital money market.

First of all, the digital money market fluctuates greatly, and the setting of the fuse point is a difficult problem. We need to understand that the circuit breaker mechanism in the traditional financial market has revised the rules many times. The purpose of the circuit breaker system designers is not to want the circuit breaker to happen, because the circuit breaker will prevent market transactions and disrupt the normal behavior of the market. Take us stocks as an example. The three percentages triggered by the decline of S & P are 7%, 13% and 20% respectively. The first gear is 7%, which has been blown twice since it has been in operation for more than 20 years, but what about the digital money market? According to the statistics made last year, the median daily rise and fall of bitcoin is 12%, which means that if we set a 7% fuse point, the normal transaction of bitcoin will be interrupted many times, which is unfavorable to the market.

Secondly, the digital money market is a 7 * 24h market, and digital money is traded on multiple platforms. Therefore, when a trading platform announces the adoption of circuit breaker measures, if circuit breaker occurs, the price difference of digital money between platforms will increase, causing arbitrage, and finally the circuit breaker mechanism will become a decoration; For example, exchange a announced that bitcoin would implement the circuit breaker mechanism. One day, bitcoin fell sharply, exchange a triggered the circuit breaker, and the bitcoin price remained at $9000, but the bitcoin price of other exchanges had fallen to $8000, which formed an arbitrage space. However, when exchange a recovers from the circuit breaker and reopens, the bitcoin price on its platform will continue to fall to $8000 under the action of the arbitrage mechanism, which is useless at all.

Then, if all exchanges or major exchanges in the industry reach a consensus and uniformly implement the circuit breaker mechanism, is it feasible? Of course, it is not feasible, because such an alliance is similar to a cartel (OPEC is a Cartel). Such an alliance is inherently unstable: all members of the alliance have deceptive motives. In game theory, this is a typical “prisoner’s dilemma”: when a circuit breaker occurs, if some exchanges in the alliance secretly trade, It will bring huge benefits to their market share and market income, which will encourage members to trade secretly and finally form a Nash equilibrium. Exchanges trade privately or withdraw from the circuit breaker mechanism, and the circuit breaker mechanism alliance also exists in name only. Including the oil crash, it is also such a “prisoner’s dilemma”. Saudi Arabia asked Russia to reduce production. Russia did not want to reduce its market share and income and did not agree; The talks broke down, and Saudi Arabia increased production, resulting in that the price of crude oil is now cheaper than that of mineral water; In fact, if both engines abide by the production reduction agreement, the situation of both sides will be better than it is now.

Responsible editor: CT

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