Sam Bankman’s Alameda Triggered Bitcoin’s 87% Plunge in 2021
A former employee at the embattled Alameda Research has revealed that a trader within the FTX trading arm punched the wrong decimal. The 2021 error led to a sudden 87% plunge in Bitcoin on Binance.US.
The disgraced affiliate of now-bankrupt FTX was behind the hiccup that temporarily declined Bitcoin (BTC) prices. The former employee disclosed the inside workings of the collapsed Bankman-Fried’s empire.
Misdial on Decimal Point Costs Alameda Million-Dollar Loss
The employee indicated that a misdial by an employee in Alameda Research left Bitcoin traders scrambling on October 21 2021, as the asset exchange value plunged. The nosedive in the Bitcoin prices lacked an apparent reason since other markets portray normalcy in their trading activities.
The employee collaborates the experience where Bitcoin prices nosedived from $65760 to exchange hands by as low as $8200. The event recorded at 11:34 UTC saw the Bitcoin prices bounce back almost to their high price level before the sudden plunge.
A review of the explanation by the concerned party, Binance.US, saw the spokesperson attribute the plunge to a bug arising in the trading systems of an institutional trader. The exact identity of the concerned investor was mysterious. However, a series of tweets posted by a former employee at Alameda Research links the trading firm with the unrest experienced in October 2021.
Manual Order Utilized in Alameda Trades
The former employee outlined the title as the fat finger on how the misplaced decimal at Alameda Research brought the market crash that ricocheted globally. The Twitter profile @aditya_baradwaj indicated on Wednesday, September 20, post that Alameda integrated algorithms and manual trading orders.
Baradwaj reveals that most trades executed by Alameda Research leveraged algorithms to issue orders. Nonetheless, the former employee revealed that Alameda occasionally relied on manually fed orders to overcome losses during market volatility. Such instances would arise when the trading firm sought profit opportunities. The ex-staff links the apparent mishap during such moments.
Fat-Finger Results in Bitcoin for Pennies Sale
Baradwaj revealed that the error occurred when the trader attempted to sell a Bitcoin block in response to breaking news. The trader issued the order via the manual trading system.
The trader would miss the decimal by the slightest of the spaces. The error resulted in Alameda missing out on the prevailing market price. Instead, it disposed of the Bitcoins for pennies on the US dollar.
Bardwaj acknowledges that the arbitrage traders profited from the mispricing and restored BTC to normal levels. Nonetheless, Alameda Research suffered losses estimated to millions of dollars.
Bardwaj attributes the losses suffered by Alameda to the fat-finger trade. He estimates the losses to be tens of millions. The former employee indicates the fat finger was judged as an honest mistake. It necessitated the implementation of additional sanity checks to the manual trades.
Editorial credit: T. Schneider / Shutterstock.com
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