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by kev009 3280 days ago
It takes a few hundred ETH to have worthwhile leverage.. so they probably risked losing a substantial amount of trade volume and liquidity with the fiasco aside from loyal customers and early adopters. It wasn't just the natural market forces. They directly manipulated the market by stopping trading, and indirectly during and after the event with a variety of system issues that are not comforting.

IMO this move to replenish traders was a mature business decision that many tech companies would have failed at let alone crypto companies. There is massive money in the long game for Coinbase/GDAX, and providing real and imaginary assurance could cement them to become the Visa of the next decades.
2 comments
peloton 3279 days ago
There wasn't market manipulation here on GDAX's part. The people they are compensating are those who got wiped because they were trading on margin (if anyone is not familiar, this adds much more risk). These people already had their portfolios auto-liquidated via the margin call so stopping trading afterwards had no impact. Same with stop loss orders, although there's a different mechanism at play there.

From GDAX's point of view the tradeoff boiled down to whether to invest in PR / brand today or risk a moral hazard problem in the future (users expecting bailouts so they take more risk).

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civilitty 3280 days ago
That's the rub with BTC: technical and security problems have historically plagued BTC companies with huge amounts of money lost. GDAX giving a FDIC-lite guarantee sets them far apart from the rest, even if their customer service and interface is inferior.
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shizzlest 3280 days ago
i dont think that will work. wait until real sums are involved and see what happens. its not a business model to pay users for their own mistakes unless the system is rigged in some way anyway. just my opinion.
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obstinate 3279 days ago
My immediate thought was whether someone might be able to induce the behavior. That combined with self-dealing (owning both the buying and selling accounts) could extract significant profits from an exchange that is willing to make its customers whole.

I would never do such (I consider it unethical, but more to the point I have neither the capital nor risk tolerance to pull it off), but I wonder if someone might. Or perhaps already has.

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