Coinbase Reimburses $1 Million to Traders After Ethereum Flash Crash
Adam White, the vice president of GDAX, Coinbase’s flagship digital asset exchange, officially announced that the company will be reimbursing Ethereum traders that suffered from the flash crash on June 21.
Earlier this week, GDAX experienced a flash crash and some orders dropped to as low as $0.1 from $342. Although the GDAX development team and Coinbase reaffirmed the proper execution of margin trades that were settled on June 21, the company stated that it will take full responsibility of the loss of customers that suffered from the unexpected flash crash.
“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,” said White in the second update of ETH-USD trading.
Within two years, GDAX has become one of the largest digital asset exchanges globally, particularly to major institutions and professional traders. White further emphasized that the reimbursement of losses of traders is a part of the company’s long-term vision to evolve into a leading digital currency exchange.
While the exact numbers remain undisclosed, analysts suggest that the reimbursement of losses could amount up to $1 million, as one user made a multi-million dollar sell order which led the GDAX trading platform to crash. Several Coinbase traders expressed their frustration with such a sell order, stating that such large orders can’t be made without the intention to manipulate the market.
“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 view this as an opportunity to demonstrate our long-term commitment to our customers and belief in the future of this industry,” White explained.
The vast majority of the cryptocurrency, bitcoin and Ethereum communities expressed their optimism and appreciation towards the difficult decision of Coinbase. However, a section of the cryptocurrency community also stated that if Coinbase and GDAX are confident all orders were processed and executed properly, the firm should not be reimbursing margin traders.
Still, to secure the trust of its clients and establish a long-term strategy to become the major global digital currency exchange, White revealed that GDAX will be restoring the value of the ETH-USD account of its customers to the moment prior to the rapid price movement.
Charlie Lee, the creator of Litecoin and former director of engineering at Coinbase, stated:
“If you lost money due to the Ethereum flash crash on GDAX, Coinbase will reimburse you with company funds. Awesome to see that.”
However, some investors and traders noted their concerns over the company’s decision to reimburse traders with its company funds as it establishes a dangerous precedent. If all traders were executed properly and such an issue occurs in the future that exceeds company funds, traders will expect the firm to take the identical approach and reimburse its traders.