On Wednesday the price of Ethereum dropped from $319 to as low as 10 cents on U.S based crypto currency exchange GDAX. The price drop occurred for a split second in what is being called a “flash crash”.
The crash happened because of an extremely large market sell order. Because of a lack of buy side liquidity, the large sell order was filled at prices unto 30% below the market price at that time. This resulted in a domino effect of margin calls and stop loss orders which further crashed the price down to 10 cents.
GDAX said in a statement that:
“On 21 June 2017 at 12:30pm PT, a multimillion dollar market sell was placed on the GDAX ETH-USD order book. This resulted in orders being filled from $317.81 to $224.48, 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 $0.10.”
In response to the flash crash, GDAX temporarily halted ETH/USD trading in order to make sure their order books stabilize. Trading has since resumed to normal on GDAX.
Because of the crash a number of traders on GDAX have claimed to have lost large sums of their funds because of margin calls and stop loss orders being triggered. Despite the crash, GDAX says that their trading engine acted as expected and that they will have to honor properly executed trades.
It isn’t clear yet weather or not the recent slowdown of the Ethereum network had any influence on the flash crash. The Ethereum network has experienced a significant slowdown in the last few days when it comes to transaction times. The slowdown in the network is largely attributed to two high profile ICOs this week. The ICOs of Status and Civic has generated record breaking transaction volumes on the Ethereum network and created a bottleneck of unprocessed transactions.