Yesterday was a separate day on the cryptomarket. The technical flaws of the American cryptocurso Coinbase caused a snowball effect on crazy events. What was going on yesterday? A reconstruction.
Coinbase Pro went offline
Last night around 9 p.m. Dutch time, Coinbase Pro went offline. Traders were unable to place orders for over an hour. According to some users, stop loss orders were also automatically canceled.
A stop loss order is a way to limit your losses. For example, you could say: “Sell my bitcoin if the rate falls below $ 9,000.”
When Coinbase went offline, the bitcoin rate there was $ 9,240. By the time Coinbase was able to trade again, the exchange rate had already dropped to 9,050 dollars and many traders had suffered substantial losses.
Coinbase’s API showed the wrong rate
And this was not the only problem. Due to a bug, the Coinbase API showed a very low rate: $ 4,250.
– ME (@ cryptodildo) October 31, 2019
An API is a way to automatically share information with other parties. An error in the Coinbase API is problematic, because many derivatives exchanges partly base the price on that of Coinbase. And there the snowball starts rolling. The Dutch Deribit also had to deal with this.
Flash crash on Deribit
Deribit is a Dutch derivatives exchange on which you can trade in bitcoin futures. With bitcoin futures you speculate on a price rise or fall in bitcoin. You cannot trade directly in bitcoin on the platform. The price on Deribit is therefore not determined by the supply and demand of bitcoin, but is a trade-off between the prices of various crypto exchanges worldwide.
The share price of Coinbase counts for approximately 18 percent at Deribit. Due to the flash crash of Coinbase, the course on Deribit also fell rapidly. Many traders have been duped by this. Their position is automatically closed. You also call that liquidated.
Deribit has since announced that it will reimburse the investors. In total, Deribit has paid out 150 bitcoin, worth around $ 1.3 million:
We have reimbursed all affected accounts. A total of ~ 150 BTC has been reimbursed by Deribit.
The insurance fund will remain unaffected and all reimbursement will be paid by Deribit Company reserves.
Again, our sincerest apologies for all inconvenience caused.
– Deribit (@DeribitExchange) November 1, 2019