Ethereum Flash Crashes By 96% After Status ICO Clogs Network

Tyler Durden's picture

While Bitcoin, and recent Chinese and Korean momentum favorite, Litecoin, have been relatively stable for much of the day, Ethereum suffered dramatic losses on Wednesday, sliding from $360 to $260 before rebounding, in the process experiencing what may have been its first flash crash, when it plunged by 96% from $315 to $13 on massive volume, before rebounding.

The crash appears to have been catalyzed by seller submitting a market order to dump roughly $30 million worth of ETH (96.1k) in one go, which obliterated the order book.

As tends to happen without fail during volatile crypto-periods, the crash almost immediately took the Coinbase offline.

Over the past 24 hours, there were several warnings about "unstable operation" in the Ethereum Network, such as this one from the BTC-E exchange.

What catalyzed today's crash?

According to one explanation posted on the Ethereum reddit, the reason was an ICO, or initial coin offering, gone very wrong. As user emansipater explained around noon, or shortly before the selling onslaught began, the catalyst for the selling was the "badly designed" Status ICO. Here are the detail:

I assume that (unlike all the price discussion here which is totally offtopic) you are referring to the transaction issues which have led several exchanges to pause ETH withdrawals. Here is what happened:

 

The badly designed Status ICO clogged up the network yesterday with a huge number of high gas fee transactions, most of which are failing but still filling up the blocks and preventing normal tx's from getting in.

 

In addition, dwarfpool and perhaps others have set bad defaults on their client software that both actually cost themselves money and also prevent the network from automatically adapting to larger gas volumes the way it's supposed to.

 

Furthermore, evidence is accumulating that f2pool was actively manipulating transactions bound for the Status ICO, which they participated in themselves, exacerbating the problem. Experts explained weeks ago that bad ICO designs are vulnerable to such attacks, but this appears to be the first time it was actually executed in the wild.

 

So now, even though the Status ICO is over, there are still a huge number of transactions clogging up the network and the only way to get transactions in is to pay huge fees (which most of the exchanges probably don't want to do). Until it clears out, people are going to be missing ENS auctions, unable to withdraw from many wallets and exchanges, etc. etc. etc.

Or, as he summarized "badly designed ICOs, plus selfish and foolish miners = major delays and maybe even substantial losses for everyone else." Judging by the ensuing flash crash, this was an accurate assessment.

The good news for ETH fans is that once the backlog of transactions clears up, the crypto should resume its previous ways.

Finally, here is a vivid example why one should never use stop sell orders in fragmented and unstable markets, from another reddit user.

GDAX just sold a good chunk of my ether at 10 cents each!

 

So I had a stop order at 316, when GDAX went down (for whatever reason) all my ether was sold at the highest (at the time) price available. When I logged in I saw a small USD amount, I though it was a hiccup. Checked the fills and indeed it was sold at 10 cents. There is no way this will be reversed right? If that's the case I believe I will be leaving the crypto market at least until it stabilizes.

Just lost 3k in the blink of an eye.

And another similar, if unconfirmed report:

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Dilluminati's picture

This is going to end badly like radio stocks in the late 20's

Jim Sampson's picture

I'm guessing there is no rule about flash crashes in altcoins...  so some lucky fuckers got in at $13 and went straight to $300. Nice little return.

cossack55's picture

BTFDQ  (buy the fucking dip quickly)

Mtnrunnr's picture

Some poor fucker just had the most ridiculous trade off all time.

remain calm's picture

Who are the dumb fuckers who don't think the FED/CIA just successfully tested their Hack ETH Algo?

bamawatson's picture

of course this could never happen with barfcoin; because all barfcoiners know who satoshi is; don't ya ?

Exponere Mendaces's picture

LOL

Someone needs to open a salt mine to sell all the salt they are mining.

My Bitcoin is doing just fine. In fact, its trading WAY ABOVE Gold.

But keep on telling me how piles of inert atoms means something in this age of global communication and smartphones in every pocket.

 

eclectic syncretist's picture

Yeah....I remember the last time gold crashed 96%....oh wait! That's never happened.

thesonandheir's picture

Some lucky bastard put a bid in at the lows, made a cool million off 350 dollars in seconds.

tmosley's picture

>tfw you had some ultra low offers but the flash crash didn't happen on your exchange so you didn't get shit

Some lucky bastards out there.

The_Juggernaut's picture

A fool and his money are soon parted. Enjoy.

Save_America1st's picture

"A fool and his money are lucky enough to get together in the first place." - Gordon Gekko  ;-)

Save_America1st's picture

Anyways...

this kinda thing is going to happen, so just always keep that in mind and protect your cryptos by not leaving them sitting on some exchange. 

But don't let shit like this or "them" discourage you from at least getting a little BTC and some ETH and store it offline for the future while these things get worked out. 

I can't access Coinbase today, but I don't care...it's an exchange and nobody should be storing their crypto on exchanges because this shit can and will happen. 

I don't need to access Coinbase to do any "trading" because I don't keep anything stored there and I'm good with the amount I now have which if offline in an encrypted wallet and quintuply protected in different ways.  

If you don't have an account yet and a few different wallets then start now.  Then buy some crypto to get used to how to work these things...don't buy a lot, just a small amount or percentage of what you would be comfortable with. 

Then as certain cryptos like BTC or ETH or Veritaseum (created by Reggie Middleton) and some others rise in value against the dollar, then sell some and use those profits to stack more phyzz silver with it.  

It's free silver, bitchez...so why not play the game a little and stack some phyzz along the way for free?  ;-)

Like it or not, believe it or not, this stuff is here to stay.  It'll evolve into many other iterations and there will battles between some and most all other cryptos will lose out.  Governments will fight it while others will adopt it.  India just legalized it after Australia and Japan, etc.  It's only going to get bigger and bigger, and this really is still the ground floor.

So don't worry about shit like this.  Just buy some, download it to secure paper wallets or encrypted storage usb wallets and let it sit.  One day you'll be very happy you did and it will be very valuable.

Jani's picture

That' s some sane rational advice.

PTR's picture

Have accounts at multiple exchanges, especially where limits on purchases/withdrawals come factor in.

MrBoompi's picture

Anyone who was able to buy at 13 needs to be investigated, unless all of the traders are anonymous.

XC Skater's picture

Not cool if associated with the seller and if getting some volume on top of the initial volume.
Otherwise, $13 is still a lot for whatt it is and how it came into existence.
How much will you pay for a number email with my name in the subject like? I'm only sending out a few million or billion of them, scout's honour!

But this does show how little volume these cryptos can handle. Imagine a day where all are trading down hard on news that will deter the greater fools to hold on to their buy orders.

Exponere Mendaces's picture

Who said gold crashed?

I get it, you didn't put your bifocals on and you just slammed out a reply on your vintage Blackberry.

Its okay, gramps.

eclectic syncretist's picture

No problem sonny,...if it's action you want, you're almost certain to get it with the cryto's right now. On the other hand, if you want stability, steady growth, and a good night's sleep, gold is the better investment for you. Either way, you get what you want.

Exponere Mendaces's picture

Gold is what you invest in when you're old and tired and have no clue about how the world is changing around you.

Then one day, you wake up and dust off your "stash" to discover that nobody gives two shits about what you thought mattered.

Its called "aging", and there are a lot of people here displaying the symptoms in excess.

 

Womb Service's picture

The Comex is a perpetual 96% crash.

Madison's_Ghost's picture

Exactly!  Its hard to fall to the floor if there is already a boot holding your head to it.

SoilMyselfRotten's picture

96% no. But do they smash it with billions of dollars they create from nothing nearly every freakin day/night? Hell yes.

Justin Case's picture

Must be an important element, otherwise why go through the effort everyday?

divingengineer's picture

It's called LIBOR, and it keeps a bank alive for one night.
And it all starts over the next morning. Ad Infinitum.

el buitre's picture

The banksters dropped $4B in 5 minutes of naked shorts on the gold comex 10 days ago and it only dropped the paper price $10.

tmosley's picture

And it has stayed down. Unlike ETH.

aminorex's picture

Because it was already crushed by 96% of it's free market value.

BTFDemocracy's picture

There is only 7000 ETH volume in that 1 minute when it flash crashed from $300 to $13...

Reichstag Fire Dept.'s picture

...that's over US$2M in gains in one minute! :o

Stuck on Zero's picture

The primary criterion for a currency is stability.

tmosley's picture

In terms of WHAT? Dollars!?

aminorex's picture

If that were true, no one would use USD.  Anyhow, ETH is not a currency, has never been a currency, will never be a currency.  BTC is a currency.  ETH is a platform for the release of illegal Ponzi ICO scams, pure and simple.

divingengineer's picture

You say that like it's a bad thing.

gold rubeberg's picture

That must've around the same time I gave my gf a bitcoin bracelet, knowing how much the ladies love the stuff ...

abyssinian's picture

Buy these flash crash dips every time in cryptos. you will be a very rich man! 

 

Huge Antshares conference in China, watch ANS skyrocket in coming days.  Buy some and thank me later.. just like when I tell you guys to buy ethereum at $80... those who bought. you are very very welcome! 

 

https://steemit.com/antshares/@dragonsteem/will-antshares-double-after-t...

 

Exponere Mendaces's picture

Remember when gold coins were alloyed with other metals to fool people in ancient times?

Remember when the stories ran of tungsten-filled gold bars being sold on the high streets in NYC?

Your "value" is dependent on someone assaying the metals to begin with - and for all you know you've got a bunch of tungsten rounds and bars.

That's a "stealth flash crash" when you decide to cash out and someone tells you that you are holding worthless cladded junk.

So don't give me that high-horse precious metals bullshit.

At least with Bitcoin, by the very nature of the algorithm and the verification done by full nodes, I know that each Bitcoin I have is valid and fungible. No assaying kit necessary, no drill bits or x-rays needed.

So piss off with that bullshit, k?

 

Exponere Mendaces's picture

LOL

I know I've won just by all the salty and retarded responses I get.

Thanks for the laughs.

 

divingengineer's picture

I thought it a very witty response, thank you.

I have a small amount of ETH, BTC, LTC, interesting, but not a replacement for the worlds currency and payment systems yet. 

I'm not going to even touch the EMP thing, we'll have more to worry about it that ever happens.

 

Jacuzzi's picture

I wish you well and hope you make it big, but the chance of an EMP or an Internet crash wiping out everything electronic is just too big for me to risk it.

imbrbing's picture

If an EMP happens we all die, no more 1's and 0's ANYWHWERE. Even fiat is toast.

No Gas anymore, no ATMS, no gorcery stores, no nothing.

Dont let any of that scare you off :) cause if it does happen like I said we all die . . .

meanwhile . . . I accumalate MORE silver with anything I can profit from. Hell even having silver

will be questionable as to whether its good 6 months into that kind of crash.

 

aminorex's picture

1. Proper crypto does not depend upon the Internet.

2. The destruction of the U.S. by an eruption of the Yellowstone caldera is much more likely, so I suggest that you get out of USD as well.

Exponere Mendaces's picture

If your "best" argument is an EMP will stop it -- then just put down the blackberry, pour yourself a scotch and go to sleep.

You have no idea what you are talking about.

 

Lukacko's picture

There's literally gold and silver in smartphones LOL

Exponere Mendaces's picture

Which is the only utility it has ever found outside of old people putting it on shelves.

Shame there are newer technologies that will replace it, specifically graphene and nano-carbon tubes that will operate in the Terahertz range.

But yeah, old shit still uses very miniscule amounts of gold that don't impact overall supply very much. And if there was a supply crunch, they'd just go with the next convenient alloy with conduction properties. So gold and silver don't have a monopoly in that regard either.

Not to mention it takes a mountain of circuit boards to even yield a small button-sized bit of metal, lol.

 

Justin Case's picture

What fundamentals do you use to gauge when bitcoin is over valued and under valued? To find an entry point and exit point?

Exponere Mendaces's picture

Oh hey, its mr words-words-words with a bunch of pedantic questions.

How about you sit-and-spin on a internet search engine and piss off while I'm making bank.

There's a good lad.

 

BeanusCountus's picture

Hey, nothing against Bitcoin here. Hope you get wealthy. What do you have against inert atoms? Has almost all of the attributes of crypto, few pluses to boot. A little more fungible than cryptos, although you are probably getting close to being able to exchange bitcoins for ethereum. And you overrate global communication and smartphones. They are merely methods of dissemination. No purity to the underlying product that is delivered. What is global communication worth as a store of value?

Point is, they both have their attributes. And their negatives. Different assets. But both assets just the same.