A Wild Ride
Last week, Ethereum pulled off a remarkable magic act: it vanished from a respectable price right into the abyss, plunging to a jaw-dropping $0.10 on GDAX. Talk about a rollercoaster! Cryptocurrency enthusiasts were left reeling as their investments hit the floor. Now, GDAX has stepped up, promising to compensate customers whose stop-loss orders were executed during this dizzying descent.
What Went Wrong?
Ethereum’s performance in 2017 had been like a bright comet, blazing through the crypto universe with a whopping 40x increase. But then, out of nowhere, came the perfect storm: network congestion and two ICOs, which cranked up the volatility to ludicrous levels. A hefty sell order of 96,100 ETH was the straw that broke the camel’s back, slashing the price from $317.81 down to $224.48 in mere moments.
Bigger Issues at Play
It wasn’t just the sell order that caused panic; the traders were already on edge due to problems at exchanges, which added fuel to the fire. As market confidence waned, those stop-loss orders and margin positions got triggered like popcorn in a microwave, sending prices sliding down to the shocking $0.10 mark.
No Conspiracy Theories Here
According to GDAX, this wasn’t a case of market manipulation. In fact, they pointed out that liquidity at exchanges is often quite limited, meaning large orders can have outsized impacts. Unlike traditional equity markets, which utilize circuit breakers to halt trading after dramatic price shifts, such measures are impractical in the wild west of cryptocurrency.
GDAX Takes Responsibility
In a move to quell the rising tide of customer dissatisfaction, GDAX’s VP Adam White made it clear that while all trades were executed accurately during the turmoil, the exchange understands the pain of affected customers. Thus, they’ll be crediting those with stop-losses triggered by the chaotic plunge. White noted in his blog post:
“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.”
So, happy days for some lucky buyers who snagged Ether during the flash crash–GDAX is allowing them to keep their newfound fortunes!
The Moral Quandary
However, one can’t help but ponder the ethical ramifications of GDAX’s move. While it may retain customers, could it create a moral hazard? The crash wasn’t due to a technical glitch but an epic sell-off. If customers feel they’ll be bailed out during volatile times, they might skimp on precautionary measures like stop-loss orders in the future. It’s a refined balancing act; investors must remain aware of the risks they take when they dabble in the unpredictable world of cryptocurrencies.
