Coinbase under investigation for Ethereum Flash Crash

The US Commodity Features Trading Commission (CFTC) investigate CoinBase Ethereum flash crash.

  • The digital currency Ethereum experienced a “flash crash”

  • CFTC is investigating the June21 Ethereum price flash crash occurred on GDAX

  • Huge monetary loss levied on many traders

  • Cryptocurrency later rebounded

The popular cryptocurrency exchange Coinbase is asked to provide information regarding “much- hyped” June21 flash crash. The incident has caused a swoop and fall in Ethereum price from $317.81 to 10 cents in matter of second on GDAX cryptocurrency exchange

Ethereum is a digital currency used as an alternative to Bitcoin. As quickly the price continued to fall, another 800 stop loss orders and margin funding liquidations caused Ethereum to trade as low as 10 cents.

Margin Funding is vital and necessary for trading with borrowed funds. Liquidation on the other hand is when these positions are closed automatically in order to prevent further loses. The knock- on selling effect caused the “flash crash” on GDAX. CFTC is a watchdog in the US for currency features. This event made to criticize on various social media platforms accusing GDAX for not taking actions while some illegal activities suspected of taking place. The crash was susceptive to cause damage to other traders who later were ensured with compensation by Coinbase. The CTFC fact- finding into the Ethereum price flash crash happened on GDAX past June is yet another sign of increased focus US Regulators are placing on cryptocurrency market. Coinbase allows traders to borrow money, called leveraging, in order to make huge wagers than would otherwise been possible. The whole crash caused the price collapse on the very next day of the incident.

CTFC is looking and investigating into all possible factors that might cause the plunge. A letter has been sent to Coinbase with a list of questions and queries about margin trading that still remained unanswered.

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