Bitcoin Cash Reopens After "Insider Trading" Probe, Sellers Dominate Book

Update: Bitcoin Cash prices are sliding on other exchanges as GDAX re-opens for trading after being halted due to 'unusual transactions'. It appears by the book that sellers are dominating...


GDAX has seen no trades yet (upper pane) but the book (lower pane) shows notably more volume to sell than buy...


*  *  *

Update: Just as we saw last night ahead of Bitcoin Cash's release on GDAX, so this morning's re-opening (reportedly at 12ET), Bitcoin is being dumped and Bitcoin Cash is surging...

*  *  *

As we detailed earlier, hours after announcing support for Bitcoin Cash, crypto-exchange Coinbase suffered a massive glitch which saw prices for the forked-cryptocurrency hit $8,500 for about an hour - around 250% higher than 'normal'. It is unclear if any trades were executed during the spike, as trading was disabled for much of the anomaly.

As The Wall Street Journal reports, the company halted trading of the currency four minutes after trading began.

Hours later, Coinbase announced an investigation into whether any employees, contractors or their friends and family used confidential information about its plans to trade Bitcoin Cash before its announcement.


"It appears the price of bitcoin cash on other exchanges increased in the hours before our announcement... [while there's] no indication of any wrongdoing at this time, we will be conducting an investigation..."


Coinbase in a blog post said it “maintains a strict trading policy and internal guidelines for employees.”


In bold font, the company added: “Coinbase employees have been prohibited from trading in Bitcoin Cash for several weeks.”


Noting the price increase of Bitcoin Cash in the hours before the announcement, Mr. Armstrong said Coinbase will be conducting an investigation into the matter.


“If we find evidence of any employee or contractor violating our policies—directly or indirectly—I will not hesitate to terminate the employee immediately and take appropriate legal action,” he wrote.

“Insider trading of crypto is so obvious,” Brian Hoffman, the chief executive of Open Bazaar, an online retail site that uses bitcoin, wrote on Twitter. Bitcoin Cash “skyrockets … hours later Coinbase rolls it out,” he noted.

In response, Coinbase confirms that sends and receives are still functional but trading on coinbase to resume once there is sufficient liquidity in GDAX

Bitcoin Cash was added to both exchanges simultaneously on Tuesday. As TechCrunch's Fitz Tepper notes: 

This is important to note because the liquidity (and price quotes) to buy and sell cryptocurrency on Coinbase come from GDAX, its sister exchange. So essentially a stable order book is needed on GDAX before Coinbase buy and sells can be functional.


This is why in the past the company has added assets (like Litecoin) to GDAX months before being added on Coinbase, so there could be sufficient liquidity at launch. On Twitter, Coinbases Ex-Director of Engineering Charlie Lee clarified that its operationally very hard to add an asset to both platforms at the same time.


While the "Flash Spike" in Bitcoin Cash was happening, a flash crash was also taking place in Bitcoin, which tanked to the tune of $3,000 before recovering 60% to $17,000 and change. 

BTC flash crashed to $14,000 on GDAX...

Prices are still volatile this morning with Bitcoin Cash moving back towards its record highs and Bitcoin fading...

Finally here is GDAX's latest update:

We wanted to provide our customers with an update on Bitcoin Cash (BCH) trading on GDAX.


At 4:00pm PST on December 19, 2017, we launched three BCH order books on GDAX. All BCH order books opened in post-only mode, allowing customers to place open orders and establish liquidity.


At 5:20pm PST, we enabled trading on the BCH-USD book. The BCH-EUR and BCH-BTC books remained in post-only mode.


At 5:22pm PST, we paused trading in the BCH-USD order book due to significant volatility. Once paused, we cancelled resting orders and cleared all BCH order books. We made this decision to ensure a fair and orderly market.


BCH order books will reopen on December 20th at 9:00am PST. All BCH order books will open in post-only mode for a minimum of one hour to establish liquidity. We will continue to closely monitor market activity.

In a separate trading hiccup, another large cryptocurrency exchange, Gemini, was unable to transact bitcoin temporarily on Tuesday evening.

The New York-based exchange, whose bitcoin prices are referenced by futures contracts offered by Cboe Global Markets, said it couldn’t process trades temporarily because of problems on the blockchain, the technology underpinning the cryptocurrency. The outage, which lasted about 15 minutes, didn’t affect customers’ assets, the exchange said.