The ethics of the Coinbase/GDAX bailout
Wow, this is a surprise. So, GDAX has decided to reverse all margin calls from the June 21 ETH-USD flash crash on their exchange.
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.
So how exactly will this work? Will they be giving these people back their ETH, or paying them back in the cash equivalent? I assume cash, as all the ETH is now gone to the limit buy orders, right?
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.
And the same goes for the limit buy orders that were placed at $0.10 and above. It looks like they will be allowing those people to keep the ETH they bought.
For customers who had buy orders filled — we are honoring all executed orders and no trades will be reversed.
So essentially this is a massive cash payout by GDAX to the margin traders who lost everything?
It definitely sucks for the margin traders who lost coins—I don't wish that on anyone. But there is a lot of noise out there that these people were margin trading when not qualified to do so, by Coinbase's own terms.
Granted this is unproven speculation. But if it is the case, then this seems to be just another bailout for people who broke the rules. Now, let me clarify… I have no skin in this game. Well, I own a small amount of ETH, but what I mean is, I wasn't effected by the flash crash on June 21st in any way. Other than having my transactions significantly delayed for 24 hours.
But I can't help feeling a little sick in my stomach knowing that rule-breakers once again are getting bailed out (in case you're wondering, I'm referring to the banking/financial crises of 2008). The only thing that is making this somewhat palatable for me is that I hope a few nice people who needed the cash got very rich with limit buy orders.
Considering GDAX came out quite strongly, quite quickly, and stated that this was normal trading—and that people who margin trade do so at their own risk—only to to do a complete 180° turn and decide that it wasn't normal. Something must have spooked them. Or perhaps they just changed their minds and came to a new conclusion. And there's nothing wrong with that at all.
So what are your thoughts? Am I am overthinking this? Is this a 'WIN WIN' situation and I'm just too bitter?
I'd love to know what you think…