Coinbase Pro's ETH Flash Crash Reminds Us How Dangerous the Crypto Space Can Be

The price of Ethereum has suffered a flash crash, falling from $100 to $13 in a matter of seconds. The flash crash happened on Coinbase Pro exchange (formerly known as the GDAX).

The price returned to normal shortly after it fell, as arbitrage makers lifted the price back to $100. It appears the anomaly only affected the ETH/USDC trading pair (USDC is a new stable coin based on the US dollar and created by Circle).

Many traders reported the situation on social media. While the majority were perplexed by the whole situation and just wanted answers, some lucky traders took the opportunity to brag about their newly acquired Ether.

 

This isn’t the first time something like this happened. Last year, Ethereum also experienced a flash crash on Coinbase Pro. That time, the cryptocurrency's price plummeted from $319 to $0.10 in a few seconds and traders were eventually refunded for their losses. Here is a video of the flash crash happening live.

That incident saw Coinbase's platform, then known as GDAX, stop offering margin trading as the crash was partly feueled by margin positions getting liquidated. Behind the crash was a multi-million dollar sell order.

What Caused The Flash Crash?

Coinbase has since released a statement on Twitter addressing the issue:

It seems that, according to Coinbase, the unusual trading activity was not caused by a system failure. If that is the case, the speculated cause for the flash crash was a manually placed sell order.

It is possible that the massive sell order was caused by an initial coin offering (ICO) cashing out its ether funds, or that it was unintended, as it might have been a crypto whale trying to cash out quickly. Either way, if the flash crash is proven to have been triggered by traders, then Coinbase most likely won’t be issuing any refunds this time.

After falling bellow $100 yesterday, Ethereum is currently being traded at $86.11 and is down 12.02% over the last 24 hours, according to data from CryptoCompare.

Although most weren’t affected by the flash crash, it brings back memories of a recent episode from crypto exchange Bitstamp, in which a bot “went wild” and saw the price of various cryptocurrencies swing wildly.

Bottom line, this is still a nascent industry where some of the things we’re protected against in traditional markets haven’t yet been properly implemented just yet. To stay safe a lot is needed and, as such, understanding exactly what we’re dealing with is important.

As CryptoGlobe covered, cryptocurrency exchange Bithumb reached the number one spot by trading volume without having the highest number of users through “incentivized trading.” On some of its trading pairs the volume quickly disappeared.

While Coinbase and Bitstamp appear to be trustworthy exchanges, they still suffer from time to time. The best way to keep your funds safe is to withdraw them from these platform when you aren’t using them, so you can control the private keys of the wallets they’re in yourself.

Ethereum's price in the last 24 hours.

Advantages of Securing IoT Devices with Blockchain, Explained By Andreas Antonopoulos

Andreas Antonopoulos, a widely-followed Bitcoin (BTC) specialist, has argued that using blockchain to solve internet of things (IoT)-related security issues may not have any significant benefits.

Antonopoulos, whose comments came during a recent Q&A session, published on May 17, 2019, said it’s possible that a traditional database management system could work just as well (as a blockchain) when it comes to securing IoT-based applications.

Logging Information From IoT Devices Using Blockchain-based Systems Could Be Beneficial

However, Antonopoulos acknowledged that distributed ledger technology (DLT)-based systems could be useful in cases where “information is logged from IoT devices in a way that it maintains that information so that it can be changed in the future … so this [would be] an immutability benefit.”

He added that many people use the term blockchain to refer to databases that are able to register digital signatures (PKIs). Antonopoulos clarified:

I think that it’s important to clarify that the purpose of a blockchain is more than recording digital signatures, [or digital timestamping]. We’ve had PKI for 25 years. There’s nothing new there and it’s not particularly interesting to take a PKI database and make it public - unless you do something with it like … building a decentralized consensus system so you can have immutability.

He continued:

And then again, what problem are you solving? What are the problems in IoT security [that you’re trying to address?] A lot of people are trying to mash these two terms (IoT and blockchain) together.

According to him, there are great security risks involved when implementing IoT-based systems.

Solar Energy Trading On Blockchains

Responding to a question about the potential benefits of using an ERC-20 compliant token, instead of just using ether (ETH), when conducting solar energy trading on the blockchain, Antonopoulos first clarified that ETH is generated by mining on the Ethereum network.

He further noted that “if you have an ERC-20 token that’s related to solar energy, then perhaps you can mine, or mint, or issue that token in response to people generating energy. So, they can earn that token directly when producing energy. But the only way you can really measure how much energy somebody is producing in order to issue a token is to buy and use that energy. And in that case, [you] could just pay in ether.”

Antonopoulos also argued that tokens are not required in all cases and that users should exercise caution when new projects are trying to offer a native token.

“Markets Are Just Human Behavior”

The data communications and distributed systems graduate from the University College London also pointed out that blockchains “operate as markets” and they operate by “using markets.” For example, there’s a market for cryptocurrency mining which is based on a blockchain network, Antonopoulos explained.

There are also markets, Antonopoulos noted, for proof-of-work (PoW)-related mining profitability and “there are currency markets within the cryptocurrency space.”

He added:

All of these markets exist because of blockchains. [Therefore,] markets are a critical application of blockchain technology. Blockchains will create better, more fair, more transparent, more open markets...wherever markets are needed. Interestingly enough, even in places where markets are needed but not wanted….[For instance,] drug markets...Why? Because drug markets are [just] markets...Markets require two things in order to happen: supply and demand....Markets are just human behavior.