Cockroach theory literally means that if a lone cockroach is seen scrrrying on the floor, it indicates a possibility of many more concealed behind a fridge or under the sink.
Traders often dispatch bots to prowl blockchains to detect highly leveraged positions in danger of liquidation. The collateral that backs this up is not sufficient to cover the loan. When successfully detected by the bots, the traders get a commission of 10-15 per cent of collateral sale. These are protections from insolvency. Cryptos were immune to all these fluctuations. Not any more. Cryptos have been hit and gone under $20000. The investors fear the counterparty announcement –‘ We regret that we can’t return your money right now. It is time to find the roaches and make a meal.’
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