GlossaryIntermediate
Circuit Breaker
A temporary trading halt triggered automatically when price moves beyond a predefined threshold, intended to curb panic-driven volatility.
A circuit breaker is a temporary trading halt triggered automatically when an asset's price moves beyond a predefined threshold within a set period, intended to pause trading and curb panic-driven, self-reinforcing volatility rather than let it continue unchecked.
Circuit breakers are more commonly associated with traditional, centralized markets than with crypto, where many venues operate without one — a structural difference worth understanding, since it means a crypto market has fewer built-in mechanisms to pause an especially fast, sharp price move.
Examples
- A traditional stock exchange's circuit breaker might automatically halt trading for a set period after a sufficiently sharp, fast price decline.
- Many crypto trading venues operate without a circuit breaker at all, a structural difference from many traditional markets worth understanding.