A flash crash on the Coinbase-owned GDAX cryptocurrency exchange caused the price of Ethereum to plummet Wednesday afternoon, temporarily erasing almost all of the coin's value. The digital currency’s price fell to about 10 cents before it began to recover, during a wild bout of automated trading that resulted in substantial losses for many investors. GDAX VP Adam White addressed the trading activity in a blog post yesterday:
“On 21 June 2017 at 12:30pm PT, a multimillion dollar market sell was placed on the GDAX ETH-USD order book. This resulted in orders being filled from $317.81 to $224.48, translating into a book slippage of 29.4%. 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.”
According to White, the company has been examining the day’s activities to ensure that there was no foul play involved in the trading. In his blog post, he suggested that the “initial investigations show no indication of wrongdoing or account takeovers” before noting that there will be a more thorough investigation to make sure that the trades were all executed in accordance with the rules. There was also some disappointing news for anyone who might have hoped that the exchange would take action to reverse the trades:
“It is important to note that these trades are final in accordance with our GDAX Trading Rules (Section 3.1). Honoring properly executed orders is critical to maintaining the integrity of an exchange.”
Some experienced traders seemed to take the news in stride, attributing the price volatility to those who had stop-loss orders in place. GDAX received strong praise from many observers for its decision to leave the trades intact. Others, however, took issue with the decision to honor the results of the flash crash - and Fortune reports that there are some already moving to organize a class action lawsuit against Coinbase.