As reported by Core Media last November, U.S.-based cryptocurrency exchanges Coinbase and its Global Digital Asset Exchange (GDAX) revealed they were going to add new cryptocurrencies, according to a new inclusion framework dubbed Digital Asset Framework. Using it, the company added Bitcoin Cash (BCH), but ran into a few problems.
Before Coinbase added the cryptocurrency to its platforms, users noted its price started surging, hinting at potential insider trading. Shortly after Bitcoin Cash was added to GDAX, the exchange paused order books due to “significant volatility.”
Through a blog post, GDAX now revealed that trading was halted on the BCH/USD trading pair due to volatility caused by heavy market demand, as an avalanche of buy orders resulted in insufficient liquidity.
According to the company’s blog post, in only two minutes and 40 seconds, the BCH/USD trading pair saw over 4,400 orders placed, out of which 2,202 were executed. This meant a $15.5 million trading volume – in under three minutes. The post reads:
“During this period, nearly 90% of all market orders were buy orders. This resulted in a thinning of liquidity and a rapid increase in price on the BCH-USD book.”
Given the huge amount of buy orders, at the time trading was halted Bitcoin Cash’s price on the exchange was at $9,500. The exchange’s blog post further revealed that the BCH/BTC and BCH/EUR trading pairs repeatedly failed to achieve its liquidity minimums. These will be reopened after the holidays, as then there will be a “higher likelihood of meeting liquidity standards.”
At press time, Bitcoin Cash is trading at $2,397 on the platform, down from its high above $4,200 after trading restarted.
GDAX’s insider trading investigation
GDAX’s blog post didn’t reveal a lot about the investigation Coinbase’s CEO, Brian Armstrong, said was being conducted on insider trading. It did notably say the company believes it is important to “minimize potentially disruptive events.”
It also revealed that its employees were notified of the decision to add BCH on November 13, and that they were strictly forbidden from buying or selling the cryptocurrency, and from sharing the information. According to the company, its approach was modeled after the practices of other financial institutions.
At the time, Bitcoin Cash supporter and Bitcoin.com CEO Roger Ver came out in defense of insider trading. Per the entrepreneur’s words, insider trading is a “non-crime” as it helps the price reflect what the market price would be after the news became public. Moreover, he added that exchanges are already being heavily regulated, and that buyers need to be aware of the services they use. This way, they won’t “depend on the government” to keep them safe.