GDAX to Compensate Customers After ETH Flash Crash

On June 21, traders watched in horror as Ethereum was hit by a flash crash. In order to regain their confidence, while demonstrating long-term commitment toward them, the Global Digital Asset Exchange (GDAX) has decided to compensate affected accounts for the losses suffered.

“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” said Adam White, vice president of GDAX.

As per further clarification, GDAX said that the exchange is honoring all executed orders and no trades will be reversed for those customers who had filled buy orders. For customers who had margin calls or stop loss orders executed, the exchange is using company funds to credit them.

The two-year-old exchange offers a secure and easy way for traders of all levels to buy and sell digital assets online instantly across six trading pairs. In May 2016, Coinbase Exchange began supporting ether trading and started operating under a new brand: GDAX (Global Digital Asset Exchange). GDAX was thus launched as an exchange for professionals to trade digital assets.

Flash Crash
According to the company, the steep fall on June 21 took place after a multimillion dollar market sell was placed on the GDAX ETH-USD order book. The huge sell order resulted in orders being filled from $317.81 to $224.48, translating into a 29.4% book decline. This further triggered approximately 800 stop-loss orders and margin funding liquidations, causing ETH to temporarily trade as low as $0.10.

“The flash crash was caused by a thin order book and a large sell order on GDAX. The low liquidity caused a price drop which triggered a series of margin calls crashing Ethereum's price, thus sparking panic in the market” said Bobby Ong, Co-founder, CoinGecko, a cryptocurrency data website.

While it's a good move to build customer confidence, cryptocurrency traders should be aware that the measure adopted by GDAX isn't the norm.

Source: http://www.investopedia.com/news/gdax-compensate-customers-after-eth-flash-crash/