Business 11 January 2018Vince Dioquino
Demand influx for Bitcoin Cash forced December shutdown, Coinbase says
Back in December, the surge in Bitcoin Cash’s (BCH) market price during the first day of its integration with popular exchange Coinbase led many people in the crypto world to believe that insider trading may have caused the sudden spike.
The spike, however, was confirmed by Coinbase to be due to the massive demand for BCH. In a report by Business Insider, the U.S.-based exchange provided research insight into how the number of people looking to buy BCH outweighed the sell orders, effectively dissolving the supply.
With at least 90% of requests on the exchange dated December 19 being buy orders for Bitcoin Cash, Coinbase said its maintenance devs had to cut off all trading for the popular cryptocurrency, if only to mitigate the influx.
The extremes to which the extent of user demand took Bitcoin Cash was unprecedented, although analysts disagree, saying that it was normal behavior with the same characteristics already observed in new cryptocurrencies that offered great use value.
When Coinbase announced its support for Bitcoin Cash on the GDAX exchange last December 19, the cryptocurrency leapt from less than $2,000 to $9,500. This was despite the average for other exchanges only reaching a median of $3,600 as the trading day closed.
In a restrospective blog post, GDAX General Manager Adam White explained it was a simple matter of supply running out because of the sudden demand. Supply equilibrium cannot be met in that instance, except if the exchange decided to immediately cease trading for the cryptocurrency altogether, which it did.
That price surge occurred because 90% of the requests were from people looking to buy the newly added currency, according to White. There simply wasn’t enough bitcoin cash for sale for the amount of demand. “Despite our best efforts to create a fair and orderly market, the launch did not go as expected, and we understand why many of our customers and members of the community are upset,” he said.
White provided a detailed timeline of events during the December 19 buying fiasco, noting that within the span of 2 minutes and 40 seconds, over $15.5 million in trade volume was done, with a total number of 4,443 orders placed. Most of these orders, however, were cancelled by Coinbase because there just wasn’t enough Bitcoin Cash being sold.
As soon as the critical lapse in judgment was patched in with better accommodation, Coinbase reopened trading for BCH on the GDAX exchange the next day, and it has flourished since then.
What urged some users to accuse Coinbase of insider trading and manipulation was the spike in price gains, just hours before the official announcement from the exchange. The company responded by launching an internal investigation on the matter.
Brian Armstrong, CEO of Coinbase, wrote on the company’s blog that if they “find evidence of any employee or contractor violating our policies, directly or indirectly,” he will, without hesitation “terminate the employee immediately and take appropriate legal action.”
Bitcoin Cash is currently the only fork from the legacy blockchain that strictly adheres to the principles stated in Satoshi Nakamoto’s whitepaper. Its protocols are modernized and improved from the deprecated SegWit1x (BTC) chain, allowing for fast, cheap, peer-to-peer transactions without centralization.
Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.
Bitcoin Satoshi Vision (BSV) is today the only Bitcoin project that follows the original Satoshi Nakamoto whitepaper, and that follows the original Satoshi protocol and design. BSV is the only public blockchain that maintains the original vision for Bitcoin and will massively scale to become the world’s new money and enterprise blockchain.
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