Flash CRASH Part 2 | How did Coinbase Respond?

Key Takeaways

in this video we're gonna keep discussing the flash crash on gee Dex tell it before about flash crashes in general and how to protect ourselves but in this video I want to just take a quick look at how gee Dex responded to the flash crash that happened on the GX exchange let's have a look I'm here at blog GX comm and I pulled up this blog post that GTX release same day so June 21st it appears to be written by Adam White and it says there that Adam is the GM of GTX on 21 June 2017 at 12:30 p.m. Pacific time a multi-million dollar market cell was placed on the GTX ETH order book this resulted in orders being filled from 300 17.8 1 to 224 dot for 8 translating into a book slippage of 29.4% this slippage started a cascade of approximately 800 stop-loss orders and margin funding liquidations causing eth to temporarily trade as low as 10 cents so they're telling us that a multi-million dollar market sell order hit the order book and this resulted in slippage so we talked about slippage in a previous video if you don't know what slippage is watch a previous video in this GX playlist one thing I want to point out about this multi-million dollar market sell order was that this was most likely not done by professional because professional would not enter such an order that would cause this type of reaction in the marketplace a professional would unload this order over multiple days they would analyze the order book and they would see how much they could actually sell at each given point in time because this particular order was losing value because of the way it was placed it says here that the slippage occurred 30% the order book slipped 30% when this order hit the market it started soaking up the demand that was right around the current market price but in order to get a fill it had to keep slipping down the price had to drop and as the price slipped lower and lower trades were occurring and it was triggering more stop losses causing this thing to snowball so if you had a million dollars worth the ether and you put a sell order in the entire amount you just lost about 300k as this thing slipped down this is one reason you definitely want to understand the order book if you're a big player if you've got a lot at stake and you just say well I'm gonna go ahead and sell the whole thing all at once that's not a good idea you have to analyze the order book and you have to see how much can you sell at each price now this was definitely a rookie mistake we can take a look at what they say next our initial investigation show no indication of wrongdoing or account takeovers we understand this event can be frustrating for our customers our machine matching engine operated as intended throughout the event and trading with advanced features like margin always carry inherent risks so what is margin we haven't talked about margin yet in this series what I'm gonna say about margin is that it is borrowing money if you borrow money from gjx and you buy ether with it and ether starts to draw then they're gonna force you to sell it's called a margin call you will have to sell in order to give the money back and you're gonna have to take a loss there's almost never a reason to be using margin we're continuing to conduct a thorough investigation and we'll keep customers updated with any resulting actions with that in mind it is important to note that these trades are final in accordance with our GX trading rules that's section 3.1 honoring properly executed orders is critical to maintaining the integrity of an exchange in response to the large price movement we decided to temporarily halt trading of eth USD that means they stopped trading so if you were if you were currently trying to trade on eth USD you were gonna be able to and this is something that happens in large exchanges like the NYSC as well once we have confirmed all systems were operating correctly we restore trading in accordance with our downtown process so I had flipped tabs and I'm now here at update number two this is the second update regarding the eth USD trading activity on June 21st 2017 you can read the first update here G Dax is just over two years old and has grown to become one the world's leading digital asset exchanges we launched our first version of margin trading earlier this year and have generally seen strong customer demand and positive feedback our long-term ambition however is to be a leader among all exchange platforms and we are committed to serving as the most trusted provider to the world's largest institutions and professional traders we are confident that all trades this week were executed properly however some customers did not receive the quality of service we strive to provide and we want to do better we will establish a process to credit customers accounts which experienced a margin call or stop loss order executed on the gtex ETH order book as a direct result of the rapid price movement at 12:30 p.m. Pacific Time on June 21st 2017 this process will allow affected customers to restore the value of their ETH USD account to the equivalent value of their ETH USD account at the moment prior to the rapid price movement to clarify for customers who have by orders filled we are honoring all executed orders and no trades will be reversed now that is big so if you were one of the lucky few that were had a buy order in down around that $0.10 level and you got an execution then they're not gonna reverse that you're gonna get to keep that ETH at the buy price of $0.10 now this next one is also big for affected customers who have margin calls or stop losses executed we are crediting you using company funds whoa I couldn't believe this when I heard it absolutely could not believe it the reason I couldn't believe it is because GDX specifically markets to professionals and institutions in a professional and an institution should understand how to use these particular tools what we have been talking about you know for the past 10 videos in this series is used stop orders that have a limit price and then also margin is extremely dangerous now they're gonna go ahead and make these customers accounts whole we view this as an opportunity to demonstrate our long-term commitment to our customers in the future of this industry we will follow up directly with affected customers about the process next week so that's how they responded it was a really big deal that they did this because they pretty much made everybody whole it made the whole event less of a big deal I can see why they did it here because cryptocurrencies are our new GX is new like they stated in the start of this article and they don't want to get a bad rep so they went ahead and they bit the bullet and they made all accounts whole but we can't rely on GDX we need to be protecting ourselves with limit orders and understanding how these markets work if we're going to participating in using g2x as it's a more sophisticated tool we have to understand how it should be used hope this video was helpful please like the video subscribe and support this deep loser channel thank you