The crypto industry keeps growing and evolving at an accelerated pace. Every day, we come across some new concepts and terminologies. As a newcomer, it can be intimidating to hear such new terms. This is why the importance of education in the crypto industry is paramount. Over $205 billion in cryptocurrencies evaporated in just 24 hours in June 2022. As a result, thousands of investors got rekt. The reason – lack of fundamental knowledge, lack of a strong hold on trends, and FUD. Hence, an investor must be aware of all the basic concepts and terms to minimize the chances of loss. Iceberg Order is one such concept in the crypto industry that only a few know about.
What Is An Iceberg Order?
An iceberg order is basically a large conditional order split into automated limit orders. The reason behind splitting a large order is to hide the actual quantity of the order. An iceberg order is used to buy or sell without causing panic in the market. High-volume transactions can lead to a situation of panic in the market, affecting the trading decisions of the masses. Iceberg orders are a hack to prevent this panic while executing the order as planned.
Who Uses Iceberg Orders and Why Are They Important?
Since iceberg orders involve executing high-volume orders, they are used by institutional investors or big individual investors that we refer to as ‘whales.’ Suppose you want to buy or sell 5,000 BTC. Seeing such a huge order on the order book, other investors will certainly start panicking. Such panic is fatal to the market’s stability. The hack is to split the order into multiple small orders. This way, the order is executed without any panic. As a result, there is little or no change in the price of cryptocurrencies or the market demand. It is the brokers that generally execute such orders on behalf of big investors. An iceberg order is just like a hidden order, except that the latter is executed after it shows up in the order book.
How To Place An Iceberg Order?
In order to place an iceberg order, you need to use a platform that gives direct access to the order books and the market. It’s almost impossible to perform iceberg trading on regular crypto platforms. Exchanges like BitMEX and BitFinex, which provide direct market access (DMA), are ideal for placing such orders. You can simply select the type of trading, i.e, spot or margin, and the crypto you want to buy/sell. Exchanges generally have a separate ‘iceberg order’ option that you can select to proceed.
Image: Cointelegraph
Can You Identify An Iceberg Order?
As stated above, iceberg orders are almost hidden. But, there’s a thin line between ‘almost’ and ‘absolutely.’ While identifying an iceberg order is a tricky task, you can find your way by digging in level-2 order books. Unline level-1 order books, level 2 provides detailed order information. It shows market depth up to 10 best bids. However, there is no sure shot way to identify such an order. You need to have an eye for detail and a knack for identifying patterns. Try spotting similar orders to find a pattern. With enough expertise and investment skills, you can decode the art of identifying iceberg orders.