Ethereum Prices Plunge To $0.10 Before Rebounding Highlighting Cryptocurrency Volatility
It took only a few seconds for the price of Ethereum, one of the hottest cryptocurrencies out there next to Bitcoin, to plummet from $319 all the way down to $0.10 on the GDAX cryptocurrency exchange on Wednesday. Following an investigation to ensure no foul play had taken place, it was determined that "multi-million dollar market sell" order caused the digital currency's value to fall off a cliff.
"Our initial investigations show no indication of wrongdoing or account takeovers. We understand this event can be frustrating for our customers. Our matching engine operated as intended throughout this event and trading with advanced features like margin always carries inherent risk," Adam White, vice president of GDAX, stated in a blog post.
GDAX is run by Coinbase, a digital asset exchange company headquartered in San Francisco, California. It operates exchanges for various cryptocurrencies, including Bitcoin and Litecoin. According to White, the multi-million dollar market sell order was filled from Ethereum valued at $317.81 to $224.48.
"This slippage started a cascade of approximately 800 stop loss orders and margin funding liquidations, caushing ETH to temporarily trade as low as $0.10," White continued.
There is a lot to digest in that statement. A stop loss order is intended to limit an investor's loss on a position in a security. For example, setting a stop loss order for 10 percent below the price a stock was purchased will limit the loss to 10 percent by triggering an automatic sale when it reaches that point. Buying on margin (also known as margin funding) is the practice of borrowing funds from a broker to purchase stock. Finally, liquidation in this instance refers to when those positions are automatically closed to prevent additional losses.
It was this sort of domino effect that led to Ethereum's value hitting rock bottom in a matter of seconds. GDAX temporarily halted trading of ETH long enough to confirm that everything was working correctly. It was, and White reiterated that all trades are final and in accordance with the exchange's trading rules.
"Honoring properly executed orders is critical to maintaining the integrity of an exchange," White said.
This did not sit will with Ethereum investors, some of which blamed GDAX for not doing enough to prevent these types of situations from occurring. Others put it out there that a multi-million dollar market sell order happens for no other reason than to manipulate the market. Regardless, this serves as a reminder to the volatile nature of cryptocurrency, and it comes at a time when excitement in digital currency is at an all-time high. Just recently, Bitcoin topped the $3,000 mark for the first time. Ethereum has also seen tremendous gains in value. Despite the hiccup, Ethereum is back trading at around $339.
Thumbnail Image Source: Flickr (BTC Keychain)
"Our initial investigations show no indication of wrongdoing or account takeovers. We understand this event can be frustrating for our customers. Our matching engine operated as intended throughout this event and trading with advanced features like margin always carries inherent risk," Adam White, vice president of GDAX, stated in a blog post.
GDAX is run by Coinbase, a digital asset exchange company headquartered in San Francisco, California. It operates exchanges for various cryptocurrencies, including Bitcoin and Litecoin. According to White, the multi-million dollar market sell order was filled from Ethereum valued at $317.81 to $224.48.
"This slippage started a cascade of approximately 800 stop loss orders and margin funding liquidations, caushing ETH to temporarily trade as low as $0.10," White continued.
There is a lot to digest in that statement. A stop loss order is intended to limit an investor's loss on a position in a security. For example, setting a stop loss order for 10 percent below the price a stock was purchased will limit the loss to 10 percent by triggering an automatic sale when it reaches that point. Buying on margin (also known as margin funding) is the practice of borrowing funds from a broker to purchase stock. Finally, liquidation in this instance refers to when those positions are automatically closed to prevent additional losses.
It was this sort of domino effect that led to Ethereum's value hitting rock bottom in a matter of seconds. GDAX temporarily halted trading of ETH long enough to confirm that everything was working correctly. It was, and White reiterated that all trades are final and in accordance with the exchange's trading rules.
"Honoring properly executed orders is critical to maintaining the integrity of an exchange," White said.
This did not sit will with Ethereum investors, some of which blamed GDAX for not doing enough to prevent these types of situations from occurring. Others put it out there that a multi-million dollar market sell order happens for no other reason than to manipulate the market. Regardless, this serves as a reminder to the volatile nature of cryptocurrency, and it comes at a time when excitement in digital currency is at an all-time high. Just recently, Bitcoin topped the $3,000 mark for the first time. Ethereum has also seen tremendous gains in value. Despite the hiccup, Ethereum is back trading at around $339.
Thumbnail Image Source: Flickr (BTC Keychain)
