The sell off on Coinbase was likely planned to profit from buying liquidated coins
Background
On thursday the 21st at 19:30 someone made a multimillion dollar market sell that crashed the price from $317.81 to $224.48 and this caused a cascade effect of stop orders and liquidations to crash the market to $0.10.
Was it malicious?
I have a few reasons to believe that the market was in fact maliciously crashed. Firstly I always trade with one thing in mind especially in crypto and that is
If it's possible and profitable, it's probable
i.e If it can be done and you will make a profit doing it, someone will probably do it.
Nothing went wrong at Coinbase, their market worked as it was meant to and as anyone that read the documentation could see that it would work. So the attacker (for want of a better term) waiting for a dip, that in this case was caused by an overheated market and a congested chain, and read the market orders to pick an opportune time, sold a massive stash to cause this.
My second reason is less conjecture, the bitmex derivatives site trades the eth/btc. It is a relatively liquid market usually trading around $10 mil + a day, it also usually trades at a premium due to the availability of leverage, this premium is usually in line with the cost of going long on poloniex by borrowing btc, and only deviates from this for short times. The current quarterly contract has never dipped below this premium for more that a couple of hours, and then during a crash but usually not even at those times.
A day before this event the bitmex pair was trading at it's usual (for that time of the contracts life) 2% premium but then 12 hours before the sell off it went to a 3-5% discount and stayed that way until the crash. This seems to me to be a person with foreknowledge that was willing to sell at a big discount. Following the crash the discount has reduced to about 0.5% as of writing this.
Thirdly, it has been done before. On the 7th of may this year the same attack vector was used on Kraken where the eth/usd pair was crashed from $89 to $25.
How did they profit
Fairly simply they likely profited two ways
With a second unconnected account on Gdax they set up buy orders at $150 $100 $50 etc
They shorted the market before the event, on bitmex, polo and/or kraken. I think they could've reasonably expected the market to crash on other sites as low as $250 given how the exchanges reacted to the kraken crash in May. In this they would of been wrong and likely only made a small amount by this method.
So I have no evidence of wrongdoing and in this unregulated environment it is not only difficult to catch these acts but it is likely they are not even breaking any laws. So whats the take away from this? Be careful you are trading in very illiquid markets, this has happened twice now and will likely happen again.
Yea, I'm inclined to agree with you. I figured out what I will do now though, to try to capitalize if this ever happens again. I'm going to place very low buy orders on GDAX for Ethereum at the very bottom. 5 dollars, 10 dollars, 30 dollars, etc . . We can't stop it from happening again. It's already happened a couple times already.
If what you say is true, and it's very probable . . it kind of reminds me of this .
Good Idea! I might have to try that as well!
So it was only on Gdax then so other exchanges didn't have the drop. I could not find a drop that low on Bittrex's charts. I say a dip but not that low. I guess I need to be on a platform that manages multiple accounts.
Crypto is like the wild west, massive opportunity but lots of risk and surprises. People getting their accounts hacked, exchanges getting hacked. You want to keep your coins in Cold Storage but then you'd never catch the short term opportunities.
Great post man, upvoted and followed!
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Other exchanges dropped but not too much they seen about a $20 drop at most, which is very bullish in my opinion
There are too many shady things about Coinbase right now. I will follow you because you seem well informed. Personally if I had any money on it I would immediately flee.
Agreed, Coinbase is a bad joke. Move your currency to a hardware wallet quickly and use another exchange to trade on.
Besides the recent ETH stupidity, who wants to do business with an exchange that crashes during periods of high volume and/or simply halts trading as they see fit.
I would not be surprised to see Coinbase crash and burn in a big way, taking investors down with it.
I am not sure they did anything shady. I would of liked to see them have something to mitigate what happened.
Kraken had stopguards in place they just failed due to a ddos and even then only fell 80% as opposed to coinbases 99.9%.
Illiquid market is very hard to trade especially if you are on margin account. Normally a large sell order would follow a series of sell order because people place cut loss at certain point and then the price keep falling because the exchange is selling off those leveraged buy because there is insufficient margin in the account. And it might try matter of few minutes for cryptocurrency.
I am going to buy some btc to day with an amazon card that I got a couple days ago, and purchase a bunch of steem. This is a great time to buy, buy, buy! IMO. Because once it hits $3.00 it will never go back. I am just glad I got here at the right time.
Waves is the future !
nice post..!!
really good one..
upvoted and followed :)
have a nice day..!