4 ms·

One Ethereum trader just made $1,142,400 in seconds, thanks to an epic glitch

35 points by KasianFranks 9y ago

celticninja 9y ago
Why should they stop trading because the price is falling? With multiple exchanges it doesn't make sense, if there was a huge fall in price across all exchanges and some stopped and others didn't then what?
- sillysaurus3 9y ago
  Why should they stop trading because the price is falling? If Ethereum grows a few orders of magnitude, then they should probably stop trading the same reason the stock market does.
- omgtehlion 9y ago
  Because all mature exchanges have price limits. Even when stock is traded on multiple exchanges. Sometimes these limits are 1/2x and 2x of average/opening/auction price, sometimes are very tight. Some exchanges stop trading given security for the day, others are recalculating these limits in almost real time and stop for a couple of minutes max. All these safeguards are there for a reason. And some site positioning themselves as “exchange” and not reversing/pausing (or at least ivestigating) tells only about their maturity.
dthakur 9y ago
This situation is usually a trade bust.
bedhead 9y ago
Can we stop using the word "currency" with these things? They are trading sardines. https://www.thestreet.com/story/11064384/1/kass-trade-the-range.html https://www.thestreet.com/story/11064384/1/kass-trade-the-ra...
appleflaxen 9y ago
this is a sensationalized headline - the event in question happened on June 23rd, and was basically a really crummy choice in how Coinbase allowed users to structure contingency trades.
GrumpyNl 9y ago
Please let the bubble pop.
Shank 9y ago
It doesn't say anything about whether or not the trader sold it back and converted it to USD/another fiat currency through an exchange. It stands to reason that if the trader were to launch that sell order, it would probably tank the market in the very same way that the whole thing started.
- sillysaurus3 9y ago
  Eh, you could've said the same about BTC in the early days. Nowadays $1M barely moves the market.
- cjrp 9y ago
  > it would probably tank the market in the very same way that the whole thing started. ...allowing them to take advantage for a second time, possibly?
kasey_junk 9y ago
This is the same flash crash that was reported last month, not a new one.
Huhty 9y ago
Why would anyone have an automated process selling LOW? That's bizarre and just asking for trouble.
- bowmessage 9y ago
  Not many people had that set up explicitly, rather, they were trading on margin (loaned capital). The value of ETH dropped so low that they were forced to sell to repay their debts, leaving their accounts empty.
  - rjbwork 9y ago
    And they dropped so low because the giant sell order was executed at market value instead of a limit order... causing the holder in question to also lose gobs and gobs of potential profit himself. All signs point to one inexperienced person who bought in at the initial ethereum offering of ~35 cents a coin, and found themselves holding 10 million worth of ETH. Not knowing how an exchange works, they put the order in for sell 33300 ETH at market price to cash in their earnings and ride off into the sunset. The buy book wasn't thick enough to absorb that much sell side @ market, so the market sells and margin calls ate the entire buy down to the very bottom huge buy @ $0.10 each. So did the value drop that low? Not really. Just due to a very immature and primitive market on one particular exchange, did this happen. When you compare these Crypto-exchanges to modern stock or forex exchanges, you'll see that they are just vastly less sophisticated.
  - deleted 9y ago
    [deleted]
teekno 9y ago
This title is extremely misleading. There was no "epic glitch", just a market crash that this trader took advantage of.
- deleted 9y ago
  [deleted]
- sureste 9y ago
  This describes most freeCodeCamp articles. They tend to use click-baity titles.
vpribish 9y ago
clickbait much?
peterkelly 9y ago
It wasn't a glitch - the system was functioning exactly as designed. Yes, GDAX should have had a circuit breaker implemented (and I expect they'll do so shortly), but lots of people were foolishly doing margin trading. This story happened more than a week ago, and GDAX has since (at great cost) decided to refund all those who lost money due to margin calls or stop loss orders: https://blog.gdax.com/eth-usd-trading-update-2-216a3b946ef6 https://blog.gdax.com/eth-usd-trading-update-2-216a3b946ef6 Hopefully this will serve as an important lesson on the risks of margin trading, and encourage all exchanges to implement circuit breakers.
hidenotslide 9y ago
Given knowledge of the matching engine (lack of circuit breakers, automatic margin calls), the number of bids in the limit order book, and the amount of margin being employed this could have been executed as a purely mechanical arbitrage. Of course in a regulated market that would be blatantly illegal.
notadoc 9y ago
Bubblemania
mattbeckman 9y ago
"We have recently increased the max amount of margin funding you can take out on the ETH-USD market to $10,000 USD." GDAX tweet two days before the glitch: https://twitter.com/GDAX/status/876857569850998784 https://twitter.com/GDAX/status/876857569850998784

35 points by KasianFranks 9y ago

Why should they stop trading because the price is falling? With multiple exchanges it doesn't make sense, if there was a huge fall in price across all exchanges and some stopped and others didn't then what?

sillysaurus3 9y ago
Why should they stop trading because the price is falling? If Ethereum grows a few orders of magnitude, then they should probably stop trading the same reason the stock market does.
omgtehlion 9y ago
Because all mature exchanges have price limits. Even when stock is traded on multiple exchanges. Sometimes these limits are 1/2x and 2x of average/opening/auction price, sometimes are very tight. Some exchanges stop trading given security for the day, others are recalculating these limits in almost real time and stop for a couple of minutes max. All these safeguards are there for a reason. And some site positioning themselves as “exchange” and not reversing/pausing (or at least ivestigating) tells only about their maturity.

dthakur 9y ago

This situation is usually a trade bust.

bedhead 9y ago

Can we stop using the word "currency" with these things? They are trading sardines. https://www.thestreet.com/story/11064384/1/kass-trade-the-range.html https://www.thestreet.com/story/11064384/1/kass-trade-the-ra...

appleflaxen 9y ago

this is a sensationalized headline - the event in question happened on June 23rd, and was basically a really crummy choice in how Coinbase allowed users to structure contingency trades.

GrumpyNl 9y ago

Please let the bubble pop.

Shank 9y ago

It doesn't say anything about whether or not the trader sold it back and converted it to USD/another fiat currency through an exchange. It stands to reason that if the trader were to launch that sell order, it would probably tank the market in the very same way that the whole thing started.

sillysaurus3 9y ago
Eh, you could've said the same about BTC in the early days. Nowadays $1M barely moves the market.
cjrp 9y ago
> it would probably tank the market in the very same way that the whole thing started. ...allowing them to take advantage for a second time, possibly?

kasey_junk 9y ago

This is the same flash crash that was reported last month, not a new one.

Huhty 9y ago

Why would anyone have an automated process selling LOW? That's bizarre and just asking for trouble.

bowmessage 9y ago
Not many people had that set up explicitly, rather, they were trading on margin (loaned capital). The value of ETH dropped so low that they were forced to sell to repay their debts, leaving their accounts empty.
- rjbwork 9y ago
  And they dropped so low because the giant sell order was executed at market value instead of a limit order... causing the holder in question to also lose gobs and gobs of potential profit himself. All signs point to one inexperienced person who bought in at the initial ethereum offering of ~35 cents a coin, and found themselves holding 10 million worth of ETH. Not knowing how an exchange works, they put the order in for sell 33300 ETH at market price to cash in their earnings and ride off into the sunset. The buy book wasn't thick enough to absorb that much sell side @ market, so the market sells and margin calls ate the entire buy down to the very bottom huge buy @ $0.10 each. So did the value drop that low? Not really. Just due to a very immature and primitive market on one particular exchange, did this happen. When you compare these Crypto-exchanges to modern stock or forex exchanges, you'll see that they are just vastly less sophisticated.
- deleted 9y ago
  [deleted]

teekno 9y ago

This title is extremely misleading. There was no "epic glitch", just a market crash that this trader took advantage of.

deleted 9y ago
[deleted]
sureste 9y ago
This describes most freeCodeCamp articles. They tend to use click-baity titles.

vpribish 9y ago

clickbait much?

peterkelly 9y ago

It wasn't a glitch - the system was functioning exactly as designed. Yes, GDAX should have had a circuit breaker implemented (and I expect they'll do so shortly), but lots of people were foolishly doing margin trading. This story happened more than a week ago, and GDAX has since (at great cost) decided to refund all those who lost money due to margin calls or stop loss orders: https://blog.gdax.com/eth-usd-trading-update-2-216a3b946ef6 https://blog.gdax.com/eth-usd-trading-update-2-216a3b946ef6 Hopefully this will serve as an important lesson on the risks of margin trading, and encourage all exchanges to implement circuit breakers.

hidenotslide 9y ago

Given knowledge of the matching engine (lack of circuit breakers, automatic margin calls), the number of bids in the limit order book, and the amount of margin being employed this could have been executed as a purely mechanical arbitrage. Of course in a regulated market that would be blatantly illegal.

notadoc 9y ago

Bubblemania

mattbeckman 9y ago

"We have recently increased the max amount of margin funding you can take out on the ETH-USD market to $10,000 USD." GDAX tweet two days before the glitch: https://twitter.com/GDAX/status/876857569850998784 https://twitter.com/GDAX/status/876857569850998784