The crypto exchange insisted the system functioned correctly despite the price of Ethereum dropping 60% in 5 minutes
At the start of this week, most cryptocurrencies experienced a significant dip, as the markets shed $400 billion. Bitcoin dropped by around 20% in 48 hours, forming the largest red candle on the daily chart in its history.
This, along with a sharp decline in Tesla share price, also means that Elon Musk is no longer the world’s richest man, having once again slipped to number two behind Jeff Bezos.
Altcoins likewise saw a major downturn – Cardano fell by around 26%, Litecoin by almost 32% and Polkadot dropped 35%. Some of the hardest hit were recent decentralised finance high flyers Crypto.com Coin (-41%) and Venus (-46%).
Solana and Fantom were among the minority which bucked the trend and continued to rally.
Ethereum experienced a decline as well, but nowhere more so than Kraken. While the price of Ether bottomed out around $1,350 on Binance and Coinbase, Kraken exchange saw a flash crash down to $700. Nearly $6 billion was liquidated across the futures market within 24 hours and many Kraken users felt they had been unfairly impacted.
Coin Metrics data scientist Kevin Lu suggested on Monday that the crash was caused by a trade matching engine malfunction, which Kraken CEO Jesse Powell denied. Although some customers claimed the exchange wasn’t working properly and they were unable to close their positions, Powell disagreed, replying to one user: “It’s liquidated according to the Terms. The movement was entirely predictable and just because the other exchanges didn’t follow, it doesn’t mean that it was impossible that they could have. Did you honestly not understand how it works?”
Yesterday, Kraken gave a more measured response in a blog post which stated a detailed investigation of the event concluded that the trading engine had in fact processed orders correctly.
The exchange made no promise to compensate traders for losses but said it was reviewing specific cases to determine how to help users on an individual basis.
Kraken also laid out upcoming improvements, such as expanding the exchange’s capacity to handle more transactions and incorporating CF Benchmarks indices, which aggregate order data from multiple markets for each trading pair to provide more precise real time price valuations.
The sell-off seems to be over for now with most coins posting positive gains in the last 24 hours. Bitcoin has increased around 5.5% in that time to retake $50,000 while Ethereum has rallied over 15% towards $1,700.