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Ethereum Exchange Reimburses Customer Losses After 'Flash Crash' (gdax.com)
An anonymous reader writes:
"The price of ethereum crashed as low as 10 cents from around $319 in about a second on the GDAX cryptocurrency exchange on Wednesday," reports CNBC, calling it "a move that is being blamed on a 'multimillion dollar market sell' order... As the price continued to fall, another 800 stop loss orders and margin funding liquidations caused ethereum to trade as low as 10 cents." An executive for the exchange said "Our matching engine operated as intended throughout this event and trading with advanced features like margin always carries inherent risk."
Though some users complained they lost money, the price rebounded to $325 -- and according to a report on one trading site, "one person had an order in for just over 3,800 ethereum if the price fell to 10 cents on the GDAX exchange," reports CNBC. "Theoretically this person would have spent $380 to buy these coins, and when the price shot up above $300 again, the trader would be sitting on over $1 million." Yet the currency exchange announced Friday that they're honoring everyone's gains, while also reimbursing customers who suffered losses. "We view this as an opportunity to demonstrate our long-term commitment to our customers and belief in the future of this industry."
Though some users complained they lost money, the price rebounded to $325 -- and according to a report on one trading site, "one person had an order in for just over 3,800 ethereum if the price fell to 10 cents on the GDAX exchange," reports CNBC. "Theoretically this person would have spent $380 to buy these coins, and when the price shot up above $300 again, the trader would be sitting on over $1 million." Yet the currency exchange announced Friday that they're honoring everyone's gains, while also reimbursing customers who suffered losses. "We view this as an opportunity to demonstrate our long-term commitment to our customers and belief in the future of this industry."
Manipulation without oversight distributed among all the different e-curencies, what a target rich environment for exploitation. SEC isn't going to investigate. Let these unregulated currencies get a foot in our REAL economy, and then watch the fireworks when these flash-crashes tank a REAL bank.
Why dont crypto currency exchanges learn from the history of stock markets? This is a known issue and is solved in stock markets using "Circuit breakers" : http://www.investopedia.com/te... Will exchanges go through all the teething problems that stock markets faced, or will they leverage what stock markets have learnt over the last few decades?
People laughed when I said I was going to have two separate accounts ... well who's laughing now?
Don't these guys know how capitalism works?
No idea what the volume's like, but if one guy made a million buying on the dip that means somebody lost it, so they're on the hook for at least that. One guy, remember.
I wonder where an outfit that's basically a server and a domain name - and the former's probably rented - can find that kind of dosh.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
1849.
this should never have happened- but the big banks are massively into ethereum mining now so the biz is rock-solid for the immediate future. But the consequence of this inasnely gross incompetence- where childishly poor algorithms lowered the price to try to match immediate buyers to the sell order- means the excgange and others will be flooded with hundreds of millions of speculative 'buy' orders. Clearly this exchange and others will cover their incompetence with investsor cash convinced this crypto-currency is the next big thing- so rather than going bust investors will hold things up and trust the 'kinks' can be ironed out.
Real stock exchanges have always have to have had mechanisms in place to protect the value of a valuable stock against sudden large sell orders. These mechanisms are rarely discussed- by are essential 'confidence' concepts that build trust in the system. Statistically anything can happen once in a blue moon- and the coping strategy is NOT a standard 'algorithm' but pro Humans trained to seek out and protect against such events. The best a computer algoritm could do is use a reserve of cash to issue an automatic balancing 'buy' but without Human oversight, this could easily be 'gamed'.
Also speculative buys should be banned below a certain percentage of current selling price- if someone wants 319 dollars worth of value for 10 cents, they should be forced to watch the market and place the order in real-time.
Anyhoo as a gamer I'm hoping confidence in Ethereum is fatally damaged so GPU prices can return to normal- but clearly this is a naive impossibility.
In 100 years it's unlikely anyone who profits today will have anything left in their estate. The government will take it, or inflate the currency, or it will be lost in some other investment, or heirs will spend it all.
It's all short term greed. But gullible humans keep falling for the same tired shell game.
AFAIC all cryptocurrencies not backed by anything solid (something tangible, whatever that is) are either stable or valuable but they cannot be both. They are traded as long as they are valuable, which makes them (and requires them to be) unstable, it is their instability that is valuable. If they are stable, the value disappears. Nobody wants to be in a stable cryptocurrency that is backed by nothing, that's because a currency backed by nothing only leads to inflation and loss of value, it cannot keep value, that's because unbacked currencies have no intrinsic value.
Intrinsic value is not a value assigned to something by decree, it is a value in itself. Any metal on this planet is valuable to some degree, some metals are more valuable than others (and this can change with time), but metals are valuable in themselves without being money.
Something that is only an electronic file with some number in it that is not backed by anything that has intrinsic value is only valuable as long as there are people desiring it for its *only* property, which is specifically to be money (in case of unbacked cryptocurrencies).
Nobody wants to be in a cryptocurrency that is not growing, people move to currencies that grow, these currencies cannot grow all the time, so there are wild swings in pricing, however if they stop growing they lose value and become stable. This stability may or may not last, but a currency like this must grow to be valuable, otherwise it is very stable and not valuable to anybody interested in growing cryptocurrencies.
You can't handle the truth.
I want get in on the ground floor before the craze returns.
Oh that's right we only just discussed how Ethereum is the next big thing and everyone should be buying it or mining it or doing something awesome with it.
https://news.slashdot.org/stor...
https://news.slashdot.org/stor...
Title of article is wrong. No reimbursements were made. Read TFA
Andy Rabagliati
Fuck them all, the people who lost everything on the margin call and the creditors that loaned the money. This is bullshit. Margin calls were done incorrectly based on the same flawed reasoning that happens in all the major stock exchanges. GDAX nothing wrong. The traders were stupid and for the good of everyone else we need to stop bailing them out.
No market is too big to avoid being manipulated by market makers - groups with enough power and funding to control the direction of a market.
These guys just sold all their stock, crashed the market, and then bought again at insanely cheap levels. Meanwhile everyone's market stops get triggered.
This stuff has been going on since the dawn of trading. Someone might remember the Rothchilds date with destiny thanks to the battle of Waterloo.
READY.
PRINT ""+-0
I'm gonna say - making these people whole is a BAD idea. People learn that they've done something stupid by having that stupid thing bite them in the ass, and playing stock market with this kind of currency and not thinking through all the edge conditions of your orders counts as doing something stupid.
There is NO one regulating this kind of exchange. There's no one to impose the use of 'circuit breakers' like the stock exchanges use. Making these people whole will NOT lead them to thinking carefully about their orders - it will lead them to being even more careless in the future.
There's a lot to be gained with virtual currencies, but if people running exchanges try to insulate their customers from the hard facts of the real world, we're going to end up with major problems.
A thousand pounds of wood moving at 300 feet per minute. Don't get in the way.
Intrinsic value is a pretty difficult concept. If the moon were made of solid gold, it would almost certainly not be worth the trouble to mine it. What, then, can we say its intrinsic value is? Generally the concept of intrinsic value is a fallacious base for an argument. However (and it must be a cold day in Hell for me to say this) it's not that you're actually wrong about cryptocurrencies. It is a requirement of a currency that it be a stable store of value, and cryptocurrencies are still 3x-4x more volatile than national currencies. However, even if they do not qualify as money, they can still be used as a unit of exchange. Commodity money has been used for illicit trading for centuries, and it continues to be useful in that sense.
The key point is that the more people use the currency, the lower the volatility will tend to be. This kind of flash crash will be a lesson to the algorithmic traders. Someone seemingly just made a cool million off of another's stupidity; they're probably going to fix their strategy so that doesn't happen again. It seems depressingly inevitable that the cryptocurrencies will eventually have lower volatility than national ones. Probably not this decade.
Those who advocate genocide deserve every protection afforded by law, and none afforded by common human decency.
"In the classical times of several species, it was the custom of the powerful to nudge the power-counters (money or other economic tabulators, status points, etc.) into occasional violent perturbations from which the knowledgeable few profited."
- Comparative History, The BuSab Text, "The Dosadi Experiment" by Frank Herbert
Ethereum is a shitcoin already. There's no need to fund the reimbursements, because Ethereum has no credibility and transactions can always be reverted.
And some people walked away with their ill-gotten gains, with the brokers in happy cahoots. It must be fun for them to do their criminal acts right out in the open.
These are rollbacks on exchange accounts. Those transactions never entered the blockchain. An exchange account is like an IOU while the exchange backs those IOUs with real coin in an internal wallet until such time as you send a coin transfer from your account to an external address. Only then do the transaction get recorded in the blockchain.
What GDAX is doing is simply restoring those IOUs for people whose IOUs got wiped out. At the same time, they allow the people who scooped up those IOUs for cheap to keep them, whether they are still there or not. Since part of their own assets are company owned coin (which is probably separate from the exchange hot wallet) all this means is that they suck up the financial hit for the sake of PR.
The blockchain was not altered in any way. There are no holes, and it is only possible for GDAX to reimburse the GDAX customers that were affected by the flash crash.
The everyday overreliance on this pathetic relish squee concerning the overriding eminence of naked incentive in dictating human behaviour patterns being one of those stupid, stupid, stupid things that just won't come out in the wash.
Welcome to Radiant City Third Rail, please watch your step.
This from the Mad Max prequel which explains, Enterprise-like, how Mad Max perfected his death-defying cliff grab before garbing himself in fifteen guns.
Now there's a man who truly knows his incentive systems.
If at first you don't succeed, dire again.