Yesterday sure was an interesting day in the cryptocurrency world. First, the Status ICO clogs up Ethereum and F2Pool is found to have manipulated over $1.2 million during that time. Just after those revelations came out, this happened:
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.
$0.10 for one Ether token! Crazy, right? Unfortunately for all margin traders on GDAX, this resulted in all their trades being instantly liquidated, causing them to lose thousands and thousands of dollars (I estimate total losses to be around the two million dollar mark). Certainly a very bad day for Ethereum margin traders.
Yet with all of this loss, someone managed to gain out of all of the other peoples' losses. We have yet to find out exactly who this is, but there seems to have been two Ethereum buys at $0.10; one for 3,800 ETH and another at 7,200 ETH. Let's do some calculations:
- 7,200 ETH x $0.10 = $720 <-- That's how much the person paid for the Ethereum.
- 7,200 ETH x $325 = $2,340,000 <-- That's how much all that Ethereum is worth now (theoretically, they could sell all of it and cash in their profits now, but because there's obviously not someone with a buy order of that magnitude on GDAX or anywhere else it would create a crash just like the one we just saw).
- $2,340,000 - $720 = $2,339,280 <-- That's how much profit he made so far.
This person made over $2.3 million in a matter of seconds, and even (possibly) without realizing it. Crazy, huh?
This just goes to show how to not liquidate (cash out or sell) your crypto assets. If you want to cash out a huge sum of money, do it slowly, bit by bit, to ensure that the market remains stable and that way you will actually make more money from it.
Why this person sold all of that Ethereum, we don't know yet. It may have been the same person who bought up the Ethereum at $0.10. We just don't know, and probably won't unless more new information comes to light.
Now you may be thinking, I'm also gonna set a buy order at a low price like that so that I can also get rich! Alas, my friend, that's what everyone is thinking right now. And they're not going to set their buy at $0.10. They're going to set it at $1, or $10, or even a $100, to catch that dip, if it happens again, before you do.
Will this happen again? Possibly. It's a very, very rare occurrence for something of this magnitude to happen, although it certainly is possible. My recommendation? Don't set a buy order at a very low price. You'd be much better off using that money to actually buy real Ethereum than to hunt that rare dip that might not ever happen again. And if it does happen, others might catch it before you do.
Also, be careful with your margin trading. Learn the risks before you do it.