GDAX will restore the balance of margin called users with company funds • Hacker News Board

Re: GDAX will restore the balance of margin called users with company funds

#21

Post by vii » Sat, Jun 24, 2017, 4:11 AM UTC

It seems that the price plummet only occurred on the GDAX ETH-USD market. Even the GDAX BTC-ETH market hasn't the spike. Normally there are many bots ferrying liquidity between these markets so this suggests that the ETH-USD market was not giving willing traders a chance to place orders. Their first blog post indicated it was working perfectly, in which case a design rethink is in order.

Coinbase regularly goes down when there is heavy trading. Very decent of them to publicly refund people for this incident, but given they have regular Ethereum trading issues, they should be quicker to suspend their market and more humble about the technical issues they're facing

Re: GDAX will restore the balance of margin called users with company funds

#22

Post by fred_is_fred » Sat, Jun 24, 2017, 4:16 AM UTC

nodesocket wrote: post #13

Wait I'm confused... The market moved dramatically and quickly, which can happen dealing with something as speculative as cryptocurrency, and yet they are refunding people? Did I miss something? Isn't this part of the risk investing?

Agreed. People who trade on margin know they are taking a risk and if they don't know then they need a lesson. They are gambling with someone else's money.

Re: GDAX will restore the balance of margin called users with company funds

#23

Post by civilitty » Sat, Jun 24, 2017, 4:31 AM UTC

Gaessaki wrote: post #7

TrainedMonkey wrote: post #4

Earlier quoted context omitted.

This really depends on how many stop loss orders were there and how users are refunded. I.E. will people be refunded in current price of ethereum or in the amount their stop loss order was set to be executed on? The number could be fairly manageable.

I'm wondering, do you suppose there is some sort of insurance for these types of eventualities?

Not off the shelf, no, not to my knowledge. This would probably fall under some kind of liability insurance contract and there are plenty of companies that would structure it for you. However, it would be a very complicated and expensive contract with the insurers demanding lots of financial and security audits as well as due diligence by field experts.

I've worked on an insurance deal in aerospace with an unproven launch vehicle and from where I was siting, it was just a guessing game based loosely on existing data and some invasive due diligence. These deals work because the insurance company is itself insured by other companies that spread the risk around enough that even a claim for the maximum amount wouldn't do much worse than wipe out a few months profit. No one insures for such large amounts with small unproven companies so the biggest risk for both parties is a systemic failure like AIG.

Re: GDAX will restore the balance of margin called users with company funds

#24

Post by civilitty » Sat, Jun 24, 2017, 4:40 AM UTC

kev009 wrote: post #20

nodesocket wrote: post #13

Wait I'm confused... The market moved dramatically and quickly, which can happen dealing with something as speculative as cryptocurrency, and yet they are refunding people? Did I miss something? Isn't this part of the risk investing?

It takes a few hundred ETH to have worthwhile leverage.. so they probably risked losing a substantial amount of trade volume and liquidity with the fiasco aside from loyal customers and early adopters. It wasn't just the natural market forces. They directly manipulated the market by stopping trading, and indirectly during and after the event with a variety of system issues that are not comforting. IMO this move to re…

That's the rub with BTC: technical and security problems have historically plagued BTC companies with huge amounts of money lost. GDAX giving a FDIC-lite guarantee sets them far apart from the rest, even if their customer service and interface is inferior.

Re: GDAX will restore the balance of margin called users with company funds

#25

Post by [deleted] » Sat, Jun 24, 2017, 4:42 AM UTC

fred_is_fred wrote: post #22

nodesocket wrote: post #13

Wait I'm confused... The market moved dramatically and quickly, which can happen dealing with something as speculative as cryptocurrency, and yet they are refunding people? Did I miss something? Isn't this part of the risk investing?

Agreed. People who trade on margin know they are taking a risk and if they don't know then they need a lesson. They are gambling with someone else's money.

[deleted]

Re: GDAX will restore the balance of margin called users with company funds

#26

Post by modeless » Sat, Jun 24, 2017, 4:50 AM UTC

vii wrote: post #21

It seems that the price plummet only occurred on the GDAX ETH-USD market. Even the GDAX BTC-ETH market hasn't the spike. Normally there are many bots ferrying liquidity between these markets so this suggests that the ETH-USD market was not giving willing traders a chance to place orders. Their first blog post indicated it was working perfectly, in which case a design rethink is in order. Coinbase regularly goes down…

This was not a technical issue. Everything worked exactly as designed. A large market sell order reduced the price to a level that triggered other sell orders (a combination of "stop-loss" and forced liquidation for margin positions) in a cascade. This was a flash crash that was over within a few seconds, so other markets did not react.

The issue is that there are a lot of inexperienced traders on GDAX right now and they were recklessly trading on margin and/or setting stop-loss orders without understanding the possible consequences.

Re: GDAX will restore the balance of margin called users with company funds

#27

Post by ryen » Sat, Jun 24, 2017, 5:09 AM UTC

Seems like a good mea culpa, but time will tell how they really feel about making good on these promises.

Re: GDAX will restore the balance of margin called users with company funds

#28

Post by amazingandyyy » Sat, Jun 24, 2017, 5:14 AM UTC

this is how GDAX can be a unicorn!

Re: GDAX will restore the balance of margin called users with company funds

#29

Post by [deleted] » Sat, Jun 24, 2017, 5:41 AM UTC

kev009 wrote: post #10

I had around $151k at the day's value wiped out as one data point (my fiat cost basis on entry was lower, not my life savings but not a trivial amount for me). Had a very busy week and didn't grok it was gone until Thursday afternoon. It actually felt cathartic to feel the feeling of losing $150k in the sense I was thinking "ok if I can accept dealing with that failure I can deal with any business fiasco when I start…

[deleted]

Re: GDAX will restore the balance of margin called users with company funds

#30

Post by jzwinck » Sat, Jun 24, 2017, 5:45 AM UTC

modeless wrote: post #3

This is interesting because it gives them a huge incentive to prevent this from happening again, if it costs them millions of dollars each time. I wonder what changes they will institute?

Presumably a circuit breaker. Many exchanges have these now. The Japanese stock exchange has a particularly nice one which pauses every 3% for people to think about what they are doing. That makes stop loss orders behave more in line with people's expectations.