Coinbase: Massive Buy Demand Caused Bitcoin Cash Launch Hiccups
Cryptocurrency exchange startup Coinbase has blamed overwhelming demand from buyers for issues experienced during the launch of bitcoin cash trading on its GDAX exchange last month.
The firm added support for bitcoin cash on Dec. 20, but soon after moved to disable trading of its newest asset – an offshoot of bitcoin with key technical differences. Hours later, trading against USD was reinstated.
GDAX general manager Adam White said in a blog post explaining the issues, that around 90 percent of initial requests were from people looking to buy bitcoin cash.
White wrote: “We paused trading on the BCH-USD book due to significant volatility caused by heavy market buy demand that resulted in insufficient liquidity.”
The low liquidity also caused the price of the cryptocurrency to shoot as high as $9,500, far higher than listed on other exchanges, he added.
According to the post, in the 2 minutes and 40 seconds after BCH/USD trading commenced, over 4,000 orders were placed, 3,461 matches occurred and trading volume reached $15.5 million.
Continued liquidity problems meant the relaunch of BCH/EUR and BCH/BTC books to be postponed until after the winter holidays, “when there would be a higher likelihood of meeting liquidity standards needed to enable trading.”
Despite the firm’s “best efforts to create a fair and orderly market,” the launch did not go as expected, White acknowledged.
Addressing allegations of possible insider trading around the BCH launch, the post also stated: “On November 13th, 2017, employees were notified of the decision to support BCH trading and were explicitly prohibited from buying and selling BCH. All employees were also barred from sharing this information with anyone outside of Coinbase.”
Soon after the launch, the firm said it would commence an investigation into whether any employees may have violated those rules.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.