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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.
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?
Considering that the exchange is both "honoring everyone's gains while also reimbursing customers who suffered losses", I'd say the person who had a 10 cent order for 3800ETH is also an operator of the exchange. So no, they're not going to leverage what stock markets have learned over the last few decades. They're profiting from it.
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."