19.04.2024

Crypto traders demand a refund from the exchange, where the Ethereum rate suddenly collapsed to $ 700

Users of the Kraken cryptocurrency exchange are demanding compensation for the unexpected collapse in the prices of digital assets on the trading floor. They became local, since there were no such price drops on other exchanges.

Severe drawdowns in value for just a few moments led to a whole cascade – that is, a sequence – of liquidating positions of marginal crypto traders. In other words, they formally lost money due to the strange work of Kraken in the last few days against the backdrop of a serious collapse of the entire cryptocurrency market.

By tradition, let’s start with an explanation: margin trading is trading with funds that the exchange lends you . Thanks to this, the trader can earn significantly more funds, because his position in this case will also be larger.

However, borrowing funds also significantly increases the risks. If the cryptocurrency rate goes the other way by a predetermined percentage, the trader will be liquidated. This is the process of forced closing of a trader’s position by the exchange if his margin – that is, coverage of funds borrowed from the platform – is not enough to compensate for losses due to price movement. In this case, he will not be able, for example, to wait out the sudden fall of the asset twice: here his position will simply be closed, and the money will be taken away.

I also recommend that you familiarize yourself with my personal experience of margin trading. Periodically, it ended in losses, which is why I gave up on the margin.

In the case of Kraken, the worst happened: the Ethereum price suddenly fell significantly lower than it was on other sites. As a result, traders’ positions were closed, and they suffered losses. Since there were no such movements in the value of the asset in other places, traders want to understand what happened and at least get compensation.

What’s the problem with the Kraken exchange?

Recall that on Monday, February 22nd, the largest red daily candlestick was formed on the BTC and ETH charts – that is, the designation of a collapse – in dollar terms in the history of the cryptocurrency. Bitcoin’s value plummeted by at least $ 9,500 , plummeting from $ 57,500, while Ethereum sank $ 400, down from $ 1,940 .

If you are new to trading, we have already covered the concept of forming Japanese candlesticks on a chart in this article. She will tell you what candles are, what parts they are made of and what they are talking about.

For clarity, we present a graph of the Ethereum exchange rate on the Coinbase exchange. As you can see, the cryptocurrency did not fall below $ 1,300, which roughly coincides with the behavior of the asset on other platforms.

Ethereum cryptocurrency blockchain

The fall of Ethereum on the Coinbase exchange.

But this is data from the largest American cryptocurrency exchange Coinbase, while on Kraken things were different. BTC and ETH crashed much more on this marketplace. Moreover, Ethereum even for a few moments managed to touch the $ 700 mark, which, in fact, was half the rate on other platforms.

Kraken exchange cryptocurrency trading

And this is the collapse of Ethereum on Kraken

On a channel called Krakensupport on the social media platform Reddit, many traders immediately expressed frustration as they lost money because of this candlestick on the chart. Some even threaten to bring legal action against the exchange, with user u / dtk6802 claiming to have lost most of his savings during the crash. Here’s a quote from Cointelegraph.

I lost most of my savings and didn’t get a response from the tech support people. I think they will return the money or lose all their clients. This is unpleasant for me, but I will join the lawsuit with a lot of evidence (screenshots) if the money is not returned to me.

That is, the trader believes that it is the exchange that is to blame for this situation, which incorrectly displayed rates due to unknown reasons. Regardless of the reason, financial losses have already taken place.

The consequences for other traders even led to debt – for example, a user of the social platform Reddit under the pseudonym GoEers304 claims that now his balance has gone negative. Here is his remark in which the exchange client complains about the situation.

For some reason, I now owe them $ 120. How does the account go into negative territory? I had enough margin to cover all the other price drops, but who can cover the false 90 percent drop?

Despite appeals from Kraken users to pay compensation, rumors have already surfaced on Twitter that the exchange is not going to be held responsible for what happened. In particular, a user under the nickname Cannibal Kiwi said that he had heard from the technical support staff a statement that they could not do anything about the incident. It is noteworthy that something similar happened on the Nexo cryptocurrency exchange. However, the official account of the exchange noted that such a sharp drop in prices was fictitious due to failures, so the platform is ready to compensate for the losses to affected customers .

How can you avoid these problems? To do this, you need to follow the rules of risk management, be sure to place stop-loss orders – that is, insurance against collapses – and monitor the balance on your exchange account. Remember: margin trading is a very risky business that, without proper knowledge, will lead to the loss of all the money on the deposit. Therefore, it is better not to mess with him without the necessary experience and confidence.

We believe that this situation is just another reminder of the high risks of cryptocurrency trading – especially with borrowed funds and leverage. Of course, someone in this way seriously earns, but this method is definitely not suitable for beginners. In addition, given what is happening, it should be remembered that trying to make money during sharp market movements is also very dangerous. So it might be better to just sit out in stablecoins – that is, coins that are pegged to the dollar – for such periods. This will save most of your savings.

Leave a Reply

Your email address will not be published. Required fields are marked *