
Traders lost millions in ethereum crash - pencilpup223
https://motherboard.vice.com/en_us/article/heres-how-traders-lost-millions-in-the-first-ethereum-flash-crash
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x775
As unfortunate as this unarguably is for the affected traders, it does go to
show the importance of utilising stop limit orders (sell x amount if price
dips below y price, but only sell for price minimum z) as opposed to standard
stop losses which simply execute. It is however important to stress that
whilst doing the former would protect against flash crashes, is does come with
the inherent risk that should a true, rapid devaluation occur, the orders
might never execute.

The golden rule of investing -- regardless of asset -- remains not using more
than you can afford to lose.

~~~
dclusin
As far as I know you don't have any input into how a margin call is executed.
The exchange confiscates the loaned assets and sells them as a market order. I
could be misinformed but I spent several years building FX order books and
this is how margin calls were handled on those systems.

~~~
mikestew
_As far as I know you don 't have any input into how a margin call is
executed._

I'm not all that familiar with FX (despite having traded), and I have no clue
how it works with blockchain thingies. However, for the couple of brokerages
I've dealt with (Fidelity, for example) you do get a choice in how it is
executed for equities. Fidelity gives you the dreaded "courtesy call", and
you've got three days to cough up cash to make up the difference, the stock
bounces back in those three days such that you're not in margin trouble, or
after three days Fidelity sells it as a market order if neither of the first
two takes place.

But this scenario? Man, it just sounds skeezy. One single sell order at a low
enough price, and your whole account gets liquidated at rock bottom prices
without you being able to do anything to mitigate it. The skeezy part comes
from the fact that there was someone on the other side who bought your coin
thingies at fire sale prices, and moments later made a fuck ton. Considering
that there's no equivalent to the SEC for blockchain coins that I'm aware of,
it sure sounds ripe for market manipulation. I don't know enough to walk
through the details of how it might work, but seems to me you use a
confederate to enter a sell order at $0.10, and you have an outstanding buy
order for one ButtLoad of coins at $0.10. Your buddy's order goes through, and
seconds later the rest of your outstanding order is filled when the margin
calls hit.

(As an aside, I swear I've seen this happen with equities. One weird order
goes through at a way-too-convenient price, say $24.95, when it's been trading
at $26-$27 all day. My conspiracy says the $24.95 hits all the stop orders
sitting at $25, then turn around for a quick couple of bucks profit. I have
absolutely no evidence that isn't circumstantial, though.)

~~~
sowbug
> I have no clue how it works with blockchain thingies

This has nothing to do with blockchains. All exchange transactions that I know
of happen off-chain. (This is not a criticism of anything you said; rather,
it's a confirmation that your experience and knowledge do transfer to this
situation.)

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GreaterFool
Coinbase has been totally unreliable. In last two weeks there was a number of
days when their entire website went down.

By extension I imagine GDAX can't be much better.

I would not leave a bunch of open orders involving a significant sum of money
on an exchange like that; or pretty much any crypto exchange. I don't have
enough trust in the quality of their software. Buy when you want to buy, sell
when you want to sell. Don't speculatively trade in a thin market on a
platform that makes you take all the risk.

Writing production quality matching engine with tools to prevent such blood-
bath is hard. At the very least GDAX could disallow orders that wipe the
market and have some circuit-breakers.

Also, in the name of transparency they could release a matching engine log
(anonymized) so if the people want more answers they could find them there.

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RcouF1uZ4gsC
I wonder if enough important people lost money that they will do another hard
fork of the block chain?

~~~
duskwuff
This is a very different situation from the DAO hack you're probably thinking
of. Most of the losses were off the blockchain, in GDAX exchange accounts.

~~~
vuyani
I actually don't see how its different. This was caused by an individual
resulting in people losing money. The question then becomes how much lost
money or WHO lost money is enough reason to pursue a hard fork?

~~~
hinchliff
The difference is the DGAX trades were off-chain (on GDAX servers). A hardfork
wouldn't change anything.

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crsv
What about the automated buy orders that were set up at the floor of the drop?
Many people lost money, but some made out like a bandit.

~~~
dghughes
Supposedly someone bought $720 at 10 cents and then it went back up making him
$2 million.

~~~
evilDagmar
Oh yes, it was right there in the log. Whoever that was is probably still
trying to wrap their head around that it actually happened (and checking with
an accountant because the IRS will be wanting a little chat).

~~~
CyberDildonics
You think the person who had those buy orders in just happened to get them
fulfilled by coincidence?

Don't you think the most likely explanation is that they were the ones that
caused it by purposely margin calling leveraged traders?

~~~
evilDagmar
If they did they personally lost _quite a bit of money_ in the process. Just
the initial sell resulted in a very large number of their coins selling for
below the market average (because there's more exchanges than just
Coinbase/GDAX). Those ten cent buys won't make up that difference.

~~~
CyberDildonics
How do you know that?

