GDax (Coinbase) bails out margin traders who lost their money
In a controversial move, GDax has done what may be the first ever bailout. In a blog post they announced that they'll be restoring money to the accounts which meet a certain threshold.
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.
Do you think this was the right move? I don't know if I agree with this kind of bailout. Unless there was a technical error on the exchange then why should people who took a big risk and lost be given a bail out? On the other hand if the goal of GDax is to encourage more risky trades in the future (which may be profitable for them) then it begins to make a bit of sense.
Thoughts?
Some people set stop-loss at something like $300, but had their orders executed at 13 cents because that was the next live bid.
I'm thoroughly anti-bailout but I'm having a hard time arguing that person should be liquidated at 13 cents. Also, fuck Coinbase and their horrible support, so yeah...bailout. I'm for it in extreme cases. It's Coinbase bailing them out to avoid losing customers, not the taxpayer.
Honestly , I wouldnt trust more than a few bitcoin on any exchange. The amount of money on these exchanges are insane. I read somewhere Polo is pulling in 40 million a day or something crazy like that. Coinbase is even larger. All it takes is one currupt worker there that has access to the funds to gank them. Then good luck getting your ticket answered.. get a trezor or something similar
Well this is mostly a good thing.
GDAX is doing all of this out of pocket for their customers. They will probably make most of it back from increased outlook on Coinbase as a whole.
Smart move.
I don't think they will be doing this again. This was GDAX's first flash and I don't see a bailout as something they will be doing twice.
NO TRADES ARE REVERSED.
Exactly. This is not like the DAO bailout. As long as they don't increase their transaction fees to make up for this underwriting that they are about to do.
Instead, it shows the GDAX cares about its customers. This will help keep many of the traders from boycotting them. Also it is important that people realize they need to use the advanced option and set limit prices with their stop orders.
Yep yep yep!
This was probably really to cover their asses but it looks good for the customers.
They will do this as many times as it happens, thats what good businesses do!! It says in their TRADING RULES - SECTION 3: MARKET INTEGRITY - RULE 3.1 B - Due to a serious technical error, Orders or Fills do not occur as specified in these Rules - in which case Coinbase will make all reasonable efforts to restore all Traders to the position they would have been in had the error not occurred.
I disagree completely.
They will most likely never do this ever again. This was their first flash crash and they will most likely make back all their payouts with trading fees from new traders with renewed trust.
There was no technical error.
Coinbase did not need to do any of this.
No technical error, really? That's the whole reason for all of this, was due to a technical error. The network being flooded and not being able to process the large number of users in such a short timeframe is due to a technical error. And yes of course they will make back the money, they're one of the most popular, trusted, and used exchanges there is. This is just a tiny little hump for them get over with many more to come im sure, thats to be expected from a business in the Cryptocurrency world.
No, a whale dumping ETH and clearing the order book causing a flash crash is not a technical error. The risks of margin were clearly outlined. The exchange operated as it should have and liquidated everyone's position.
Sure a circuit breaker would have stopped this but they did not have one per their terms. Not their fault.
They can prevent this from happening again by implementing a circuit breaker. This would adhere to their Trading Rules.
They will probably add one.
They didn't need to though. They don't even have to offer margin calls.
They DID NOT need to refund anyone.
Coinbase has a need to appear safe, they have repayed lost customer funds in the past as well.
Clearly it'd be cheaper for them to have a good exchange/website that doesn't fail due to high traffic, but hopefully they continue to hang on while throwing money at patrons to keep them happy.
New and improved way of dealing with these exchange issues is key for the future I really hope the "iconomi" like exchanges open for business soon.
This is the right move, and its a move that will save them tens of thousands of customers. Also, it says in their TRADING RULES - SECTION 3: MARKET INTEGRITY - RULE 3.1 B - Due to a serious technical error, Orders or Fills do not occur as specified in these Rules - in which case Coinbase will make all reasonable efforts to restore all Traders to the position they would have been in had the error not occurred.
I don't even know what to think of it but I'm sure it will be a huge relief to those who lost big that day. Then again, why are those who had huge risk appetite in hopes of huge gains loved more?
I actually don't think this is the right move. Any investor should know that there is no guaranteed investment regardless of asset class. You can lose money at any time. These particular investors on GDAX even invested with margin meaning they borrowed money to increase their leverage to increase their returns. This is a highly speculative and risky move. The investors who did this should have understood the risk they took in doing this.
However, I do believe that exchanges should compensate or potentially bailout clients if they are at fault. For example, if an exchange goes down during a day, a trader or investor can't do any transactions in their position leading to potential losses. In this case, I believe the exchange owes something to their clients.
It says in their TRADING RULES - SECTION 3: MARKET INTEGRITY - RULE 3.1 B - Due to a serious technical error, Orders or Fills do not occur as specified in these Rules - in which case Coinbase will make all reasonable efforts to restore all Traders to the position they would have been in had the error not occurred.
Sweet post!
i'm happy coinbase are making the right moves
check out my latest post on AntShares :)
let me know what you think
Well, I like to refer to it (ethereum) as the dark horse. We all know the saying of the dark horse, I'm with GDAX's move on this. They're still prioritizing the users so this is good. High stakers pursue, low-risk players make do!
May the odds forever be in your favor. Cheers!
Very good position.
Thank you by reading your articles. We learn things.
Follow my profile if you have the time.