Coinbase, one of the world's biggest digital currency exchanges, on Wednesday, announced Bitcoin Cash support, allowing customers to buy, sell, send and receive this ‘hard-fork’ of Bitcoin.
On its blog, Coinbase said the service of buying and selling Bitcoin Cash was available on its exchange, GDAX.
And, within minutes of the announcement, prices of Bitcoin plunged, falling below $17,000 from a high of $19,694 on Sunday (according to Coindesk). At the time of publishing this article, the price of a Bitcoin was $17,659.29.
Bitcoin Cash, on the other hand, spiked to $8,500, leading Coinbase to suspend trade within minutes.
However, it is still unclear whether this was a software glitch or if deals were really being made at this level.
Some experts claim 'FOMO' or the 'Fear of Missing Out' could be one of the biggest reasons for investors to buy Bitcoin Cash at a price as high as $8500. Further, one of the biggest exchanges supporting Bitcoin Cash leads to the assumption that prices of the cryptocurrency would rise in the future.
On this sudden volatility, Adam White, General Manager of GDAX wrote,
“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.”
According to media reports, Coinbase fears its own workers might have exploited the exchange’s foray into the cryptocurrency.
After serious allegations of illegal activity on the exchange, Brian Armstrong, Co-founder and CEO of Coinbase stated in a blog post,
“It appears the price of Bitcoin Cash on other exchanges increased in the hours before our announcement. While digital currency prices fluctuate quite a lot and we have no indication of any wrongdoing at this time, I wanted to share a few thoughts with our customers.”
In theory, Coinbase’s staff, who were in the know that it was about to add Bitcoin Cash to its exchange, could have profited by buying the cryptocurrency on other exchanges. Coinbase, on its part, seems to be investigating the matter. Brian also stated,
“We’ve had a trading policy in place for some time at Coinbase. The policy prohibits employees and contractors from trading on “material non-public information”, such as when a new asset will be added to our platform. In addition to trading restrictions, it prohibits communication of material non-public information outside the company. This includes to friends and family. Our launch of Bitcoin Cash today is no exception to this.”
Moreover, ‘employees and contractors (of Coinbase) were explicitly prohibited from trading Bitcoin Cash and disclosing launch their plans over a month ago’, stated Brian.
Brain also commented,
“Given price increase in the hours leading up the announcement, we will be conducting an investigation into this 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.”
At present, Bitcoin Cash is the third biggest cryptocurrency in the world with a market capitalisation of $55.8 billion, according to Coinmarketcap.
Tarush is driven towards delivering unbiased and accurate reportage while engaging with as many mediums as possible to narrate a fresh perspective. Working for the past few years in the digital space with YourStory, he has covered the Indian technology ecosystem extensively, focusing on new age Fintech companies, while building strong connects within the industry.