Why The Ethereum Flash Crash Isnt Surprising, And What It Means For Crypto
Why the Ethereum Flash Crash Isnt Surprising, and What It Means for Crypto by ConsenSys on June 22, 2017 53877 Omega One Update (Jun 26, 4:30 pm): In an unprecedented move, GDAX will pay out of its own company pockets to affected customers who had margin calls or stop loss orders executed. Source here. On Wednesday, the price of Ether flash-crashed by over 99.9% in less than a second on GDAX , one of the largest cryptocurrency exchanges. This was due to a multi-million dollar sell order being placed on the exchange. Because the exchange did not have enough buy orders on its books to accommodate a sell this large, the price crashed immediately from $317.81 to $224.48; this movement was enough to then trigger a wave of about 800 automatic position liquidations due to margin calls and stop-loss orders, driving the price briefly as low as $0.10, and causing GDAX to suspend trading. This is only the most recent of a series of similar events across crypto exchanges , and rather than being a reflection on GDAX in particular, its a symptom of the underlying problems created by the stress of capital flow increasing faster than market infrastructure development. Although the price quickly returned back above $300, the millions of dollars that investors lost due to forced selling of their positions will not be recovered. This incident highlights the relative immaturity of the cryptocurrency trading ecosystem, which has been stressed by a 20x increase in daily trading volume since the start of 2017 without any fundamental change in market structures. From the trader-in-questions side (assuming they were simply trying to get out of this position in a crude way and not a malicious actor or market manipulator) dumping the whole position at once will have likely incurred millions in l Continue reading >>
What Caused The Ethereum Flash Crash?
No indication of wrongdoing, exchange says It was a rough day for traders of the worlds second-largest cryptocurrency on Wednesday as ethereum plunged from more than $317 to briefly trade as low as 10 cents in a flash cash on the GDAX exchange before rebounding. In a post, GDAX Vice President Adam White said a multimillion-dollar market sell order was placed on GDAXs ETH-USD [ethereum-U.S. dollar] order book, which resulted in orders being filled from $317.81 to $224.48for a slippage of 29.4%. That, in turn, began a cascade of around 800 stop-loss orders and margin-funding liquidations, which sent the price temporarily as low as a dime, he explained. A stop-loss order requires the security to be sold when the price hits a certain threshold. Margin-funding refers to trading with borrowed money. Liquidations can occur when margin-funded positions are closed out automatically to prevent further losses. The combination of stop-loss orders and margin liquidations contributed to the sharp downward spiral, which was followed by a sharp rebound. White said the GDAX decided to temporarily halt trading of ETH-USD in response to the price movement, then restored trading in accordance with the exchanges downtime process once it was confirmed that all systems were operating correctly. White said the exchanges initial investigations showed no indication of wrongdoing or account takeovers but acknowledged that such an event can be frustrating for our customers. White said the exchanges matching engine operated as intended throughout this event and that trading with advanced features like margin always carries inherent risk. And dont look for the trades to be reversed. We are continuing to conduct a thorough investigation and will keep customers updated with any resulting actions. Wit Continue reading >>
The 45-millisecond Ether Flash Crash Prompts Safeguard Effort
The 45-Millisecond Ether Flash Crash Prompts Safeguard Effort Coinbases GDAX exchange is considering using circuit breakers GDAX might also introduce incentives to lure market makers Last weeks flash crash in the ethereum digital currency prompted the venue where it happened to consider safeguards used in other markets such as stocks. Circuit breakers that would pause trading to prevent accidents from spiraling out of control and a system of incentives to lure market makers whod help keep prices from dropping too far are among the options under consideration, according to Adam White, general manager of Coinbase has consulted with the New York Stock Exchange and other experts on how to prevent flash crashes, White said, though he declined to give details. NYSE Group The crash at 3:30 p.m. New York time on June 21 drove the currency down to 10 cents from $317.81. The cause, White said, was a single $12.5 million trade -- one of the biggest ever -- placed by a customer as a market order, or a request to sell immediately. That pushed ethereum to $224.48, but the pain didnt end there. The decline triggered sell orders from traders whod requested to bail on the currency if prices fell to certain levels, and prompted GDAX to liquidate some margin trades. It all happened in just 45 milliseconds, White said in an interview. Thats when computer algorithms started buying, driving prices back up to $300 within 10 seconds, he added. This was not long, sustained, panicked selling, White said. It was a very rapid, cascading event followed by aware and intelligent programmatic traders buying. Ether fell 4.8 percent to $288.50 on Friday afternoon, according to data compiled by Coindesk.com. Preventing the next digital currency flash crash might depend on learning lessons from the stock Continue reading >>
Ethereum Flash Crash: Coinbase Reimburses Traders | Fortune
When a trader sold a large position in the digital currency Ethereum last Wednesday, the sale triggered a so-called flash crash on the Coinbase-owned exchange GDAXcausing the price to tumble temporarily from around $320 to just 10 cents. The price quickly recovered, but not before some traders, who had set up automated sell orders in the event of a price decline, got walloped. Coinbase initially responded to the flash crash by saying tough luck to these traders, whose Ethereum had been sold off at fire sale prices to meet margin calls and so-called stop-loss orders. But late Friday, the company reversed its position. The VP of GDAX, Adam White, said in a blog post the exchange would make the flash crash losses: We will establish a process to credit customer accounts which experienced a margin call or stop loss order executed on the GDAX ETH-USD order book as a direct result of the rapid price movement at 12.30pm PT on June 21, 2017. This process will allow affected customers to restore the value of their ETH-USD account to the equivalent value of their ETH-USD account at the moment prior to the rapid price movement. White added that it would fund the customer credits with company money, and that it would not unwind the trades of those who had placed buy orders during the flash crash. This is terrific news for those who bought Ethereum during this periodit means some fortunate traders snapped up the digital currencywhich is trading at $305 as of Monday morningat a massive discount. Continue reading >>
Ethereum Plunging Despite Flash-crash Victims Getting Money Back - Business Insider
facebook linkedin twitter email copy link Ethereum is under pressure on Monday, trading down 18.55%, or $55, near $241. The selling comes despite a late Friday blog post from GDAX an exchange for cryptocurrencies like ethereum and bitcoin promising that victims of last Wednesday's flash-crash will be made whole. Ethereum tumbled from $296 to $0.10 in a matter of minutes before recouping those losses. GDAX had initially told customers would not receive a refund but reversed course a few days later. Another possible catalyst for the selling could be a hoax circulated over the weekend that co-founder Vitalik Buterin had died. Vitalik responded by posting a tongue-in-cheek selfie on Twitter with a hash code from a recent Ethereum block proof that he was still alive. Even with Monday's selling, Ethereum is still up 2,890% in 2017. The cryptocurrency's rapid rise has drawn the attention of cybersecurity pioneer John McAfee, who on Friday announced his company would begin mining for Ethereum . Continue reading >>
Will Ethereum Crash Again In The Near Future?
Will Ethereum crash again in the near future? This has been something Ive been thinking about and after a friend gave me some valuable insight, I came to an important realization. For most beginners in this space, when they look at the price of Ethereum, they look at the price in USD. This means that this is the chart theyre looking at: Based on this, it looks like Ethereum is at an ATH and might come crashing back down at any moment. But talking to investors in the blockchain industry, this is not how they judge ETH (or any cryptocurrency). They truly dont care about the amount of USD in their portfolio. Instead, they care about how a cryptocurrency is doing compared to BTC. When you analyze ETH from that perspective, here is what the cryptocurrency looks like: Based on this comparison, ETH has been falling in price since June and is actually close to its beginning of year BTC amount (.05 BTC). So to traders involved with cryptocurrency day trading, ETH has seemed like a loser for quite some time. I dont want to make any predictions about the price based off this, but I think its interesting to see things from the perspective of the traders deciding the price of cryptocurrency assets. If youre referring to the unique instance of Ethereum hitting $10 on one exchange before correcting back to full price, those are rare and usually done deliberately by unscrupulous market makers to cash out peoples trading positions (this is where an ombudsman comes to the rescue). In this instance the exchange was overloaded and crashed providing a very low price for a short period of time. If you had a buy order waiting, tying up thousands to sit idly in an account in multiple exchanges, you may have benefit from this if the exchange honoured the trade and didnt have system rules to pr Continue reading >>
Ethereum Crashed From $319 To 10c On Gdax After Multimillion Dollar Trade | Hacker News
Wait, so basically I could create a buy order for $2, leave it sitting there, and wait until there is another crash ? If there is no crash, then nothing happens. For good measure, do it for every currency on the exchange. Is there any risk or downside to this? Seems like buying a lottery ticket for free.  ... or someboy fat-fingers an order - although I think in that case I think still the higher bidders would win, wouldn't they? A number of people with USD on deposit at Mt. Gox, who correctly understood Bitcoin's price to be unsustainably high and were waiting for the correction, are now 3+ years into waiting for a Japanese bankruptcy court to pay out their claims. They are, in the Bitcoin economy, the lucky ones -- the more common thing which happens when exchanges fail (which happens in 20%+ of exchange-years) is for all money (and things of more dubious value) to be lost. This is different than in more traditional markets, where custody of assets is distinct from being an exchange (you don't wire money to the NYSE to trade there), custodians/brokers are regulated, individual accountholders are insured, and you generally don't have to have $2000 cash on deposit and locked up to keep an order for 1000 of Google at $2 on the books. I feel like I have to say that professionals very much do have orders far outside the usual trading ranges for various things in the expectation that a fill against that order usually represents a quickly profitable mistake by a counterparty. A major portion of the reason that this is something professionals do and amateurs largely don't is because there do exist cases where orders get filled far away from the market and one's counterparty praises all the spirits of capitalism that someone else was being inattentive to the fundamental Continue reading >>
Coinbase Under Investigation For Ethereum Flash Crash
Coinbase Under Investigation for Ethereum Flash Crash The Commodity Futures Trading Commission is investigating Coinbase for an Ethereum flash crash that occurred in June. During the crash, the ETH exchange rate plummeted down in an instant, but quickly regained its price. According to Bloomberg , Ethereum dropped from trading at$317.81, down to 10 cents in a split second. However, its recovery was also swift. It regained a $300 price point in mere seconds. Also read: Switzerlands FINMA Eyes Crypto Valley The Bloomberg article said, The Commodity Futures Trading Commission has requested information from Coinbase Inc. about a June 21 incident on its GDAX platform in which the Ether digital token suffered a precipitous drop, falling to 10 cents from $317.81 in milliseconds before quickly recovering, said two people familiar with the matter. Could Margin Trading have caused the Plunge? The CFTC is concerned that leveraged or margin trading may have precipitated the flash crash. Margin trading allows users to borrow money to trade. This is called trading on margin or leveraged trading. Among the issues the agency is focused on is what role leverage might have played in the plunge, asCoinbaseallowed traders to use borrowed money to make bigger wagers than would have otherwise been possible, said the people, who asked not to be named because the review isnt public. After the flash crash, Coinbase discontinued their margin trading service. Their actions quickly piqued regulatory interest and scrutiny. The Cryptocurrency Wild West and Coinbase Cooperation Regulators are now scrutinizing cryptocurrency exchanges even more. It comes as no surprise that the CFTC is thoroughly investigating Coinbase because the CFTC wants to control the wild west nature of the digital currency eco Continue reading >>
4 Lessons I Learned From The Ethereum Flash Crash
4 Lessons I Learned from the Ethereum Flash Crash Posted by Jol Valenzuela | Jun 28, 2017 | Opinion | Over the weekend we had a fun market crash in cryptocurrency, precipitated by Ethereum causing a domino effect. Its easy to watch the crash and write it off as a random act to dismiss and move on. However I think there are a few important things we can learn about the state of the cryptocurrency industry from this whole episode. The biggest no duh of the list, I know, but its important to remind especially new investors of the stage were in at this particular moment. Why is X coin pumping right now? Sometimes there doesnt have to be a reason. Why is the market crashing? Could be something as silly as a fake news story about a prominent developer being killed in a car accident. Or it could be because some whale just decided they wanted to sell. Real development news takes a back seat in importance to the ICO or drama du jour. 2: Cryptocurrency is entirely too speculative Blockchain technology promises to use innovations to solve a good chunk of the worlds problems, but lets remember that, right now, most of that is still just promise. Yes, much of the tech is actually ready for use right now, but how much of this use is being fulfilled? At this stage in the industrys development, market valuations make it difficult to distinguish between vaporware and coins with large development teams being relied on for day-to-day commerce. Its mostly gambling on future potential for the moment. 3: Bitcoin still has a commanding lead in non-speculative use With market share and use cases slipping, weve seen the heralding of the Flippening and an end to Bitcoins dominance. Not so fast. Sure, the trend to a flippening of sorts is real, but its a ways away. Far and away, most services ti Continue reading >>
Ethereum Crash: Why Some Coinbase Traders Lost Big | Fortune
The white hot cryptocurrency Ethereum went on a wild ride on Wednesday, plummeting from around $320 to around 10 cents in a so-called flash crash. The price soon recovered but not before some investors took a terrible bath and some others made out like bandits. Ethereum, a popular new digital currency, trades on exchanges much like its older rival bitcoin. The most widely-used exchange, Coinbase-owned GDAX , operates like a traditional stock exchange, and lets traders buy stock on margin and place so-called stop loss ordersan automated instruction to sell if the price falls below a certain point. As Adam White, the VP of GDAX, explained in a blog post , one investor placed a multi-million dollar Ethereum sell order at 12:30 p.m. on Wednesday. The size of the order caused the price of the currency, which is already volatile, to dip. Things started to go really haywire, however, as the price dip triggered a series of stop loss orders. This slippage started a cascade of approximately 800 stop loss orders and margin funding liquidations, causing ETH to temporarily trade as low as $0.10, White explained. In other words, the computers executing the stop loss orders began to sell at all costs and, so long as there was someone on the other side to match the order, the trade went througheven if the price was totally irrational, and driven only by an algorithmic frenzy. Continue reading >>
Ethereum Traders Prepare For The Next Flash Crash With Bids For Millions Of Eth
Ethereum Traders Prepare for the Next Flash Crash with Bids for Millions of Eth Following yesterdays spectacular flash crash which sent eths price down to 10 cent, ethereum traders have mobilized with bids for nearly 3 million eth at under $50, hoping to catch the next huge market sell. Bids for nearly 3 million eth at under $50. Theyre likely dreaming of instantly turning $350 into one million, as one eth trader did yesterday during the flash crash, scooping thousands of eth at just 10 cent each. These flash crash events, however, have only happened once a month, starting in April when a GDAX glitch sent price to 6 cents, in May when a large sell order at Kraken sent it to $20, and yesterday when a large sell order sent it to 10 cent. But such things are unpredictable, so eth traders are preparing just in case, hoping to strike lucky and get instantly rich thanks to either some fat finger or perhaps some drunk trader who thinks its a great idea to sell millions at market order. A market order which then causes a cascade of stop losses and margin calls, sending price further and further down, assisted somewhat by panicked traders too, so giving us a spectacle. Some lose their shirts in the process, with their funds being instantly obliterated as the order book is quickly vacuumed, while some others strike it rich, as the eth trader did yesterday. However, flash crash events are somewhat rare, so locking up all that fiat in unlikely to be filled bids does not come without cost. Theres lost opportunity, and its being held by a third party, so there is counter-party risk too. Eventually, therefore, the bids down there may thin considerably as everyone forgets and moves on, but right now eth traders are sitting at their desks, tapping their fingers, while praying for anoth Continue reading >>
Buyers Beware: Lessons From The Ethereum 'flash Crash'
Buyers beware: Lessons from the ethereum 'flash crash' The price of the digital currency ethereum briefly dropped from more than $300 to 10 cents on Wednesday on one exchange. The "flash crash" shows how the young infrastructure isn't yet able to handle large trades. Big Wall Street firms have increased their interest in digital currencies and their underlying blockchain technology. One event this week shows why digital currency markets still have a long way to go before they're safe enough for large-scale trading. On Wednesday afternoon, a "multimillion dollar" sell order was placed on the GDAX exchange for the digital currency ethereum. That triggered a chain of events that resulted in ethereum briefly plunging to 10 cents on the exchange, according to a blog post by the exchange's vice president, Adam White. Stop-loss orders baked-in directives to sell an asset once it falls to a certain price contributed to the temporary drop. The same issue contributed to the May 2010 flash crash that sent the Dow Jones industrial average plunging nearly 1,000 points only to recover minutes later. Since then, the U.S. Securities and Exchange Commission approved a "limit up and limit down" mechanism to halt stocks after sudden moves of more than 5 percent. "What we've been doing in the stock market to prevent flash crashes, they're nowhere near that in the cryptocurrency market," said Joe Saluzzi, co-founder of Themis Trading and co-author of "Broken Markets," a 2012 book criticizing the way regulators have allowed high-frequency traders to take unfair advantage of markets. "You have a big market that has no confidence now," Saluzzi said. "How are you going to attract sizeable investors?" Wall Street has paid increasing attention to digital currencies like bitcoin and ethereum, tha Continue reading >>
Ethereum Price Crashed From $319 To 10 Cents On Gdax After Huge Trade
The price of ethereum crashed as low as 10 cents from around $319 in about a second on the GDAX cryptocurrency exchange on Wednesday, a move that is being blamed on a "multimillion dollar market sell" order. Ethereum is an alternative digital currency to bitcoin and had been trading as high as $352 on Wednesday. It has since rebounded from its flash-crash lows to trade to about $325 on the GDAX exchange. According to industry and price tracking website Coinmarketcap, which takes into account the price on several exchanges, ethereum was trading around $338. Adam White, the vice president of GDAX which is run by U.S. firm Coinbase, posted on the exchange's blog, outlining what took place at around 12:30 p.m. PT on Wednesday. According to White, the multimillion dollar market sell order resulted in a number of orders being filled from $317.81 to $224.48. As the price continued to fall, another 800 stop loss orders and margin funding liquidations caused ethereum to trade as low as 10 cents. A stop loss order is a trade that is executed automatically once a security in this case ethereum hits a particular price. Margin funding is essentially trading with borrowed funds. Liquidation is when these positions are closed automatically in order to prevent further losses. The knock-on selling effect caused the flash crash on GDAX . The chart below is a screenshot of the GDAX price showing the high and low price. Many on social media criticized GDAX and alleged there was some sort of illegal activity taking place. GDAX denied this. "Our initial investigations show no indication of wrongdoing or account takeovers. We understand this event can be frustrating for our customers. Our matching engine operated as intended throughout this event and trading with advanced features like margi Continue reading >>
Coinbase Is Reimbursing Losses Caused By The Ethereum Flash Crash
Coinbase is reimbursing losses caused by the Ethereum flash crash Relevnt launches a publisher-centric news app Earlier this week, GDAX, the digital currency exchange run by Coinbase, experienced a flash crash in its USD Ethereum market. Within seconds the price of ETH crashed from ~$320 to as low as $0.10. While the price recovered quickly, the rapid price movement caused many traders to experience margin calls or stop loss orders, resulting in potentially severe losses. While many initially thought the flash crash was the result of nefarious work, GDAX eventually confirmed that there was no indication of wrongdoing or account takeover. Instead, the flash crash was the result of someone placing a multi-million-dollar sell order at market price, meaning ETH would change hands at whatever price bidders were currently offering until the entire order was filled no matter how much lower the price was than the current price of ETH. Filling this order caused ETH prices to instantly slip 30% to $224 which in turn caused 800 stop loss orders and margin liquidations, which further drove the price down, to as low at $0.10. Typically, someone placing a large sell order would liquidate their position over time to minimize the downward effect on price. Also, GDAX reminds users who are about to initiate large sell orders that it will cause slippage in the market, meaning this trader most likely didnt care (or didnt understand) that his trade would move the market. For anyone not familiar with trading and exchanges, a stop loss order is an order to sell stock (or cryptocurrency) when the price drops to a certain level. Its basically used as a way to cut your losses. Additionally, a margin funding liquidation is when you borrow funds to go long and bet that an asset will rise in price Continue reading >>
Will There Be Another Ethereum Flash Crash?
Home Cryptocurrency Ethereum Will There Be Another Ethereum Flash Crash? Will There Be Another Ethereum Flash Crash? Gaurav S. Iyer, IFC Profit Confidential 2017-06-27T07:51:35Z 2017-08-01 02:38:10 ethereum flash crash what is ethereum flash crash is ethereum trading risky ethereum 10 cents gdax exchange gdax ethereum ethereum price prediction As fear drenches the market following the Ethereum flash crash, the one question haunting every investor's mind is this: Will there be another flash crash? Cryptocurrency,Ethereum It wasnt a bad dream, dear reader. The Ethereum 10 cents posts, tweets, and videos floating around the Internet were real. The Ethereum flash crash was real. In the blink of an eye, ETH prices plunged from $320.00 to $0.10 on the GDAX exchange. Can it happen again?That is the question haunting investors in the aftermath of the flash crash. It may explain why the Ethereum price is down more than 20% since the crash. The market is drenched in fear.Heres what happened: Some idiot sold a ton of ETH tokens, which pushed prices down. The sale triggered stop-loss orders, which pushed prices down further. Every time the price moved down, new stop-loss orders were triggered. Coinbasethe owner of the GDAX exchangebungled its response to the crisis. At first, the company seemed to shrug off the problem, saying tough luck to the traders that suffered losses. Eventually, it came to its senses.We will establish a process to credit customer accounts which experienced a margin call or stop loss order executed on the GDAX ETH-USD...This process will allow affected customers to restore the value of their ETH-USD account to the equivalent value of their ETH-USD account at the moment prior to the rapid price movement.(Source: "ETH-USD Trading Update #2," The GDAX Blog, Jun Continue reading >>