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24 Jun 2017

Ethereum price crashes from $319 to 10 cents in seconds

Ethereum hits record low value, then bounces back

The price of ethereum, an alternate cryptocurrency to bitcoin, crashed from $319 to 10 cents within seconds on the GDAX cryptocurrency exchange causing many ethereum traders to lose large amounts of money.

The cryptocurrency has since then rebounded from the crash, which was attributed to a "multimillion dollar market sell", to be trading at about $325.

In context

Ethereum hits record low value, then bounces back

What is ethereum?

Ethereum was proposed in 2013 by cryptocurrency programmer Vitalik Buterin. It is basically a public, open-source, blockchain-based distributed computing network with smart contract abilities. For transactions, ethereum uses a cryptocurrency token called "ether" which can be transferred between accounts as compensation for computations performed.

How did prices fall drastically in seconds?

Details

How did prices fall drastically in seconds?

The vice president of GDAX explained how the crash transpired.

A multimillion dollar market sell resulted in a number of orders being filled from about $317 to about $224.

As prices fell, over 800 stop loss orders kicked in which, coupled with margin funding liquidations, caused ethereum prices to fall off a cliff within seconds.

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What are stop-loss orders and margin funding liquidations?

Stop-loss orders are trades which are executed automatically when a security, ethereum in this case, reaches a certain valuation. They are meant to curb further losses. Margin funding involves trading on borrowed funds, and liquidation involves stopping trade to prevent further losses.

Losers & Winners

While many lose money, several gain from the crash

The crash was a painful experience for many ethereum traders, who blamed GDAX for a lack of proper control mechanism.

Several traders lost large sums of money from $3,000 to $9,000.

At the same time, others made large sums of money - for instance, a person ordered 3,800 ethereum at 10 cents, and when the price went up, the valuation was over a million.

Growing interest

Growing interest in cryptocurrencies

Despite the crash, the subsequent recovery points at growing excitement over cryptocurrencies.

While both bitcoin and ethereum have seen pullbacks, they also hit record high valuations recently.

Whereas bitcoin and its supporting blockchain tech is seen as a payment network, interest in ethereum is growing because its supporting tech has smart-contract applications wherein a computer can execute a contract when certain conditions are met.

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