Remember the Ethereum ‘Flash Crash’ in June which marked a steep drop in the price of Ethereum from $317 to just 10 cents but was however quick to regain the grounds jumping back to $300 in few seconds after the fall.
Following this event, one of the largest and most popular cryptocurrency exchanges – Coinbase – is under the lens of regulatory bodies and is currently being investigated by Commodity Futures Trading Commission (CFTC).
As reported by Bloomberg :
“The Commodity Futures Trading Commission has requested information from Coinbase Inc. about a June 21 incident on its GDAX platform in which the Ether digital token suffered a precipitous drop, falling to 10 cents from $317.81 in milliseconds before quickly recovering, said two people familiar with the matter.”
As per various sources, the steep drop in the price of Ethereum was majorly due to a single huge sell order worth $12.5 million and was spiralled further by the execution of several auto-trades by other traders. The crash was so big that the price fell from $317 that day to just 10 cents per Ethereum. It is said that a multitude of traders were quick to grab this opportunity while placing huge new orders for Ether and pushing it to regain the lost ground back to $300.
As per the Commodity Futures Trading Commission, leveraged or margin trading might have fuelled the Flash Crash of Ethereum. “Leveraged” or “Margin” trading is a kind of trading method which allows users to borrow money to trade.
Soon after the Flash Crash, Coinbase had discontinued their margin trading services which was quickly noticed by regulatory authorities. CFTC is a statement said:
“Among the issues the agency is focused on is what role leverage might have played in the plunge, as Coinbase allowed traders to use borrowed money to make bigger wagers than would have otherwise been possible, said the people, who asked not to be named because the review isn’t public.”
Commodities Futures Trading Commission is currently investigating Coinbase for the Flash Crash and in spite of much pressure, the officials at Coinbase are willingly operating with the investigating authorities. In response to the ongoing investigation, Coinbase has issued a statement:
“As a regulated financial institution, Coinbase complies with regulations and fully cooperates with regulators. After the GDAX market event in June 2017, we proactively reached out to a number of regulators, including the CFTC. We also decided to credit all customers who were impacted by this event. We are unaware of a formal investigation.”
Also Read: Coinbase Becomes The First Bitcoin Startup Unicorn
Many investors are quite curious to know the outcome of this matter to properly understand the event of the Ethereum Flash Crash and how to ensure a safety net while trading in cryptocurrencies.
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