If an asset is very illiquid this can lead to great volatility. The order books are thin and medium or even small market orders move the market. Everybody who tried to accumulate microcaps before knows how difficult it is to build or dump a position that is bigger than the orderbooks. With microcaps already small buys or sells can lead to massive slippage. Shitcoin Margin Trading wih illiquid “shitcoins” is a recipe for deseaster.
Poloniex offers a peer-to-peer-system for margin-lending on its exchange. And it offers trading on margin for extremely illiquid tokens. This opens a possibility for whales to accumulate a bigger position of this shitcoin, short it with high leverage and then start dumping the coin to crash the price. Flash Crash and Haircut On the 26th of may the was an incident on Poloniex.