Kraken compensates victims of Ethereum’s flash crash
On February 22, the entire cryptocurrency market experienced a major correction, supported by a bearish move in the price of Bitcoin (BTC). The vast majority of cryptocurrencies followed suit, including ether (ETH).
This correction lasted several hours, and the ether price went from $1,800 to nearly $1,500 at its lowest point on all but one platform: Kraken.
On the Kraken exchange, which is considered an industry benchmark, the Ether was hit by a flash crash of incredible power. In just a few minutes, the ETH course on Kraken plunged to $700.
Kevin Lu, blockchain analyst for analytics firm CoinMetric, summed it up in a tweet. You can see an overlay of the course of the Aether on several platforms. Shown in pink, we notice that only Kraken was hit by a flash crash .
Today’s market crash is brought to you by Kraken’s malfunctioning trade matching engine. pic.twitter.com/m2sBqdTt4M
— Kevin Lu (@luyongxu) February 22, 2021
Stunned, the cryptosphere then accused Kraken and its systems of being hit by a technical failure, which would have caused this flash crash. Kraken quickly denied these accusations and assured that its transaction processing system worked properly during the fluctuation of the ETH price.
In fact, this impressive fall was probably caused by a chain of liquidations on the margin positions and the serial triggering of stop loss. Although Kraken says it was not involved, investor anger was so great that the platform decided to compensate them.
According to a report by the New Money Review, Kraken customers affected by this flash crash were offered compensation ranging from 5 to 50% of their total losses.
But is it really Kraken’s fault?
Kraken co-founder Jesse Powell has not hesitated to respond to the discontent of some Twitter users by suggesting that users not use leverage if they do not understand the underlying risks.
“Our job is to secure your funds, not tell you how to trade. Don’t trade with leverage if you don’t understand the risks. “
Jesse Powell maintains his position, and hammers that Kraken is not the source of the problem. In another series of tweets, however, he explained that the company was taking money out of its pocket to support the victims of the flash crash in order to retain its customers.
The mystery remains to this day, although the crypto-community remains convinced that the fault lies with Kraken. Moreover, Ethereum is not the only cryptocurrency to have been hit by a flash crash.
Indeed, in parallel with ether, ADA (Cardano blockchain) also experienced an unprecedented drop, from almost $0.80 to $0.10 on Kraken on the same time horizon. The same goes for Polkadot’s DOT, which suffered a $30 to nearly $15 drop. Defending users while highlighting other flash crashes, Kevin read added:
Adding Cardano pic.twitter.com/PBw8E2NGfi
— Kevin Lu (@luyongxu) February 22, 2021
The mere fact that Kraken was the source of several flash crashes at the same time casts doubt on the sincerity of their words, however refunding loss is not something you see happening often in the crypto world.
Kraken on fishing for investors
According to Bloomberg, which reports the news, Kraken is already in discussions with investors through firms such as Fidelity, Tribe Capital and General Atlantic. Not much is known yet about the identity of investors, but it would appear that “Kraken’s valuation could exceed $20 billion depending on demand.”
Bloomberg notes that the maneuver could bring Kraken close to Coinbase, its big rival which is also located in the United States. It has been valued at more than $100 billion. But on the exchange volume side, the two platforms are closer. Over 24 hours, Kraken posted a trading volume of more than $2 billion, compared to $3.8 billion for Coinbase.
The exchange solidifies its position
According to CoinMarketCap data, Kraken now ranks th among exchange platforms with the largest daily transaction volume, behind Binance, Huobi and Coinbase and above Bitfinex or Bithumb .
In addition, the platform has shown that it is beginning to clear new territories. In the middle of the month, it announced the launch of Kraken Ventures, an investment fund that supports cryptocurrency-related startups. The exchange also announced that it had started operating a Chainlink (LINK) node earlier this year.
We don’t know if Kraken has failed in the Ethereum flash crash, but the decision to compensate users it’s a great thing. Also, Kraken looking for funding and its good past (never hacked, never lost funds of their users) make it a trustable exchange.
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