GDAX Covers Estimated $9.47M in Ethereum Flash Crash

By Zach Yam

Following the flash crash of Ethereum from $317 to $0.01 that occurred on June 21 2017 at approximately 12.30 PT, GDAX released an official statement on their blog. They cleared suspicion of any foul play and stood by their trading engine, which they believe worked as intended during the event. 800 margin positions were wiped out as a cascade of margin calls and stop losses were triggered from the massive sell off .

In the aftermath of the flash crash, GDAX released a second update on their blog. Much to the relief of GDAX customers, they announced that they would compensate those directly affected as a result of the rapid price movement – they would credit their customers’ accounts who had stop losses executed from their own pocket, and would also honor all buy orders that were filled.

I was curious to find out how much this bailout would cost GDAX. I wrote a quick script to do that, which you can see over here. I used GDAX’s public API, and trawled through the trade IDs until I located the point at which the first trade at approximately $224 occurred (ID: 6324501) and ended at $0.01 (ID: 6326580).

You can see the transaction data starting from and ending at. Each page limits the transaction data to 100 at a time, so you can visit different transaction IDs by editing the url accordingly.

In my JavaScript code, I used the npm library ‘sync-request’, which makes GET requests synchronously. I needed this because I was making multiple calls and I didn’t want any asynchronicity messing with my results.

I used a simple for loop to make requests to the API. For each page result, I stored the size of each transaction into the pageResult array, following which I calculated the total loss by adding up the elements in that array. Given that GDAX would compensate it’s customers at the point at which their stop losses had triggered, for simplicity’s sake, I used the USD value of $224.48.

USD $4.57 million was exchanged within a few seconds from transaction IDs 6324501 to 6326580. In total , 42197.48 ETH was sold, at an average price of USD $108 per ETH. At the price point of $224.18 where I assumed stop losses were triggered at, that would be a total compensation of USD $9.47 million.

While my estimation is on the higher range bound given that GDAX profits from transaction fees and not all of the executed trades were a result of stop losses, my calculated value can hopefully give you a sense of their compensation rounded to a mathematical significant degree.