This should go down as the Great Ethereum Crash.
On June 21 2017, GDAX had a problem where, after a multimillion dollar trade, ETH had a split second nosedive to USD.10, which is INSANE.
It’s unclear whether ETH really went that low or it is a result of errors or a glitch in GDAX platform code, or due to market manipulation that triggered a glitch in exchange code execution.
What is more insane is what happened as a result.
The exchanges went wild and halted trading, Coinbase went down, people were being told they couldn’t buy or sell, but in the mayhem and pandemonium, some ETH holders with Stop Limit orders out had their ETH sold at the low prices on the way down to and including the USD.10 level, and others with the low ball buy orders that were placed ended up scooping up a fair number of those insanely cheaply sold ETH tokens.
What caused this Ethereum crash?
Was the Ethereum crash an accident?
In the immortal words of many a sitcom actor speaking in character, “this was NO accident!”
What is likely, but I have no proof, is that someone or some group scammed the system by placing low ball buy orders for ETH, and then this “whale”, or group, dumped about 100k Ether, causing the massive price instability, which in turn caused a bout of selling that caused the price to plummet, triggering stop loss orders all over to be executed, and their low ball buy orders were sitting there waiting to scoop up the stop losses that sold for crazy low prices due to the automated computer execution of those orders. Someone may have made a million dollars from a $380 low ball order.
Then there was this less “conspiratory” theory:
>> no it wasn’t 100k that triggered it. it was much less.
>>>> 23k I thought. Took it to 214 and margin call cascade did the rest of the work.
That is, until the exchanges realized and everything was halted.
But, to many, the damage was done.
At the same time, one can’t help but marvel and admire the sheer act of piracy and system manipulation that allowed this person or group to walk away with millions of cheap “stolen” Ether as a result of a manipulated Ethereum crash.
To quote some guy in a private forum, who put it succinctly in a very funny way,
“…so who are these people who bought up this Ether at ten cents? If you put in a $30 million sale the exchange is bound to know who did it. Every exchange I have signed up with has my email, phone number, and a pic of my dick. They KNOW who did this…”
They knew how the systems would behave and what to do to trigger it and how to take advantage of it to profit illicitly.
But who were they?
We may never know for sure who caused the Ethereum crash, but there is a lesson here for everyone who is experimenting with day trading cryptocurrencies.
Be careful about using stop limits and remember that a tool that is meant to protect you from sudden market downturns can be manipulated to do the exact opposite, since these exchanges still have work to do to prevent this stuff from happening.
This is fascinating, brilliant, and yet wicked, stuff.
It’s so interesting that I had to write about it.