Gemini is a bitcoin exchange based in New York City and founded by Cameron and Tyler Winklevoss. It is a next generation exchange aimed at institutional clientele. As a result, the exchange lacks liquidity in the market allowing for a buyer with enough fiat and a fat finger to completely buy out the order book and send the price skyrocketing. Earlier today, as pointed out first by the user vevue from r/Bitcoin bitcoin price on the Gemini exchange skyrocketed to $2200. The direct cause for the spike is yet unconfirmed but it is strongly suggested that the cause is due to human error. Simply misplacing a period or forgetting a zero when creating a bid or an ask can shift a value a whole magnitude causing unforeseeable losses.
chart from cryptowatch
This isn’t the first time that such an event transpired, in fact last year a trading bot on btc-e malfunctioned and started executing trades against itself causing the price to momentarily plummet. A similar event happened on poloniex last month where someone forgot an extra zero and as pointed out by americanpegasus from bitcointalk “Instead of putting in a buy order of everything below .0000012 bitcoins they must have attempted to buy everything below .000012 bitcoins, an entire order of magnitude difference.” This caused yet another momentary spike in price on said exchange.
The so called fat finger trades that cause massive losses to unfortunate victims are more common than you think. They are so common that Coinbase implemented a fat finger protection mechanism:
Any order that is placed at a price that is significantly higher or lower than the most recent bid / ask will trigger a confirmation step, but only if that order would match on the order book at the time it is placed. This creates a layer of protection against accidental typos or other errors when entering price amounts.
If the price spike is in fact due to human error then Gemini exchange should implement a fat finger protection mechanism similar to coinbase’s. It is surprising to see an exchange with as much funding as Gemini forget to implement such an important feature. Currently the exchange is undergoing planned maintenance according to their official twitter account:
Gemini will be undergoing planned maintenance tonight between the hours of 12:00 AM and 4:00 AM Eastern time.
— Gemini (@GeminiDotCom) November 14, 2015
It is interesting to see if Gemini will honor the executed trades or if it will roll back the orderbook, we reached out to Gemini exchange for a comment. According to market data under one hundred bitcoins were exchanged during the spike to $2200. Because Gemini was able to respond so fast it seems that minimal damage was done and the exchange should resume operations shortly. If you liked this article follow us on twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin and altcoin price analysis and the hottest cryptocurrency news.
Gemini has reversed all trades prior to the error and confirmed that it was in fact due to human error. Gemini responded:
On Friday, 13 November 2015, a Gemini customer notified us that they had placed a very large market order on the exchange in error.
After reviewing the trade, our account review team and executive management determined that the trade met our criteria for reversal as defined in our terms of service. Following this determination, we reversed each trade that resulted from the market order.