The value of Bitcoin saw a sudden and unexpected drop of 87% on October 21, 2021. Recent insights point towards Alameda Research, under Sam Bankman-Fried’s leadership, as the potential instigator.
An ex-staffer from the company recently revealed details about its internal workings, alleging that a trading mishap inside the establishment caused the sharp decline in Bitcoin’s value on Binance.US.
The Incident: Rapid Drop and Recovery on Binance.US
At 11:34 UTC (7:34 a.m. ET), a sudden drop in Bitcoin’s value was witnessed, plummeting from roughly $65,760 to an astonishing low of $8,200. The cryptocurrency quickly recovered in a matter of minutes, nearly restoring to its prior rate.
Though other Bitcoin markets stayed stable, Binance.US traders were left scratching their heads over the unexpected descent. A Binance.US representative mentioned at the time that a system glitch from an “institutional trader” was the root cause of the issue.
The Revelation: Former Alameda Research Employee Speaks Out
It remained a mystery as to who the trader behind the glitch was until today. Baradwaj, an ex-employee of Alameda Research, stepped forward suggesting that his former employer might have had a hand in the sudden disturbance.
Baradwaj explained that while Alameda Research primarily relies on algorithms for executing trades, during times of market fluctuation or when there’s a tempting prospect, the firm’s traders can opt to manually place orders. He pointed out that it was in such a situation that the blunder happened.
“In an attempt to sell a substantial amount of BTC reacting to some news, the trader used our manual trading platform,” shared Baradwaj on Twitter. “However, they overlooked the fact that the decimal point was misplaced by several positions. Instead of selling BTC at its prevailing market rate, it got sold for mere cents on the dollar.”
Consequences: Alameda Research Faces Millions in Losses
The incident wasn’t without significant repercussions for Alameda Research. The company reportedly shouldered a blow, facing losses in the ballpark of tens of millions of dollars. Meanwhile, arbitrage traders jumped at the chance, leveraging the pricing blunder to bring Bitcoin back to its typical price range.
Commenting on the severe financial hit, Baradwaj remarked, “The financial setback from the ‘fat-finger’ incident was monumental for Alameda – running into the tens of millions. However, considering it was an inadvertent error, the only recourse was to instate more rigorous checks for any manual transactions.”
Given the volatile nature of the cryptocurrency market, it’s anticipated that traders and investors will now demand clearer insights into the safeguards employed by trading entities like Alameda Research. This revelation from an ex-staff member has certainly put the spotlight on aspects that demand scrutiny.
