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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Ex-Alameda Employee Claims Firm Triggered 87% Bitcoin Price Plummet In 2021

Ronaldo Marquez
Ronaldo Marquez
1 year ago
3 mins read
Bitcoin

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In a recent disclosure, a former employee of Alameda Research, a trading firm led by Sam Bankman-Fried, has unveiled crucial information regarding the dramatic 87% plummet in Bitcoin (BTC) value during 2021. 

The incident, which occurred on October 21, 2021, witnessed BTC’s price on Binance.US nosedive from approximately $65,760 to $8,200 within a short period.

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Insider Details Of Bitcoin Plunge And Alleged Manual Trading Error

The ex-employee, Baradwaj, alleged that the trading firm was directly responsible for the sudden price drop, attributing it to a “manual trading error” rather than solely relying on algorithmic trading. 

Baradwaj claimed that a trader at Alameda Research inadvertently entered an incorrect decimal while attempting to sell a block of BTC in response to breaking news. 

Consequently, the trade was executed at an extraordinarily low price, resulting in a drastic crash.

Highlighting Alameda’s trading operations, Baradwaj revealed that the firm primarily employed semi-systematic strategies, where traders fine-tuned algorithms to execute trades automatically at high frequencies. 

However, manual trades were occasionally employed in instances of system bugs or arbitrage opportunities on platforms where automated trading had not been implemented.

Unlike automated trading, which adhered to sanity checks and market prices, manual trades were discretionary and prone to human error. Unfortunately, an Alameda trader’s mistake triggered a chain reaction on that fateful day in October. 

The erroneous trade caused Bitcoin’s price to plummet from its peak of $65,000 to as low as $8,000 on certain platforms before swiftly recovering through the actions of arbitrageurs.

The incident created a stir on social media, with traders and news outlets scrambling to understand the sudden price movement. Binance.US, the platform at the center of the flash crash, issued a statement attributing the event to a bug in the trading algorithm of one of their institutional traders.

Baradwaj further states that the losses incurred by Alameda Research were substantial, amounting to tens of millions. Still, due to the genuine nature of the mistake, the firm took immediate action to enhance sanity checks for manual trades. 

This incident exposed a vulnerability in Alameda’s risk management practices, prompting implementing “robust measures” to prevent similar occurrences in the future.

The former employee shed light on the working culture at Alameda, characterized by a philosophy of moving fast to capitalize on opportunities, even if it occasionally resulted in unforeseen costs or vulnerabilities. 

This approach, championed by Sam Bankman-Fried, shaped the culture at Alameda Research and the now-bankrupt crypto exchange FTX.

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For nearly two years, the BTC flash crash incident remained a puzzle to the public, leaving many wondering about the cause behind such a significant price drop. With the revelations made by Baradwaj, the veil has been lifted, providing valuable insights into the events that unfolded behind the scenes.

Bitcoin
BTC’s drop on the daily chart over the past 24 hours. Source: BTCUSDT on TradingView.com

As of this writing, the largest cryptocurrency in the market, BTC, trades at $26,600, down by over 2.1% in the 24-hour time frame. 

Featured image from iStock, chart from TradingView.com 

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Ronaldo Marquez
Ronaldo Marquez

Ronaldo Marquez

Ronaldo is an experienced crypto enthusiast dedicated to the nascent and ever-evolving industry. With over five years of extensive research and unwavering dedication, he has cultivated a profound interest in the world of cryptocurrencies.

Read more

Ronaldo's journey began with a spark of curiosity, which soon transformed into a deep passion for understanding the intricacies of this groundbreaking technology.

Driven by an insatiable thirst for knowledge, Ronaldo has delved into the depths of the crypto space, exploring its various facets, from blockchain fundamentals to market trends and investment strategies. His tireless exploration and commitment to staying up-to-date with the latest developments have granted him a unique perspective on the industry.

One of Ronaldo's defining areas of expertise lies in technical analysis. He firmly believes that studying charts and deciphering price movements provides valuable insights into the market. Ronaldo recognizes that patterns exist within the chaos of crypto charts, and by utilizing technical analysis tools and indicators, he can unlock hidden opportunities and make informed investment decisions. His dedication to mastering this analytical approach has allowed him to navigate the volatile crypto market with confidence and precision.

Ronaldo's commitment to his craft goes beyond personal gain. He is passionate about sharing his knowledge and insights with others, empowering them to make well-informed decisions in the crypto space. Ronaldo's writing is a testament to his dedication, providing readers with meaningful analysis and up-to-date news. He strives to offer a comprehensive understanding of the crypto industry, helping readers navigate its complexities and seize opportunities.

Outside of the crypto realm, Ronaldo enjoys indulging in other passions. As an avid sports fan, he finds joy in watching exhilarating sporting events, witnessing the triumphs and challenges of athletes pushing their limits. Furthermore, His passion for languages extends beyond mere communication; he aspires to master German, French, Italian, and Portuguese, in addition to his native Spanish. Recognizing the value of linguistic proficiency, Ronaldo aims to enhance his work prospects, personal relationships, and overall growth.

However, Ronaldo's aspirations extend far beyond language acquisition. He believes that the future of the crypto industry holds immense potential as a groundbreaking force in history. With unwavering conviction, he envisions a world where cryptocurrencies unlock financial freedom for all and become catalysts for societal development and growth. Ronaldo is determined to prepare himself for this transformative era, ensuring he is well-equipped to navigate the crypto landscape.

Ronaldo also recognizes the importance of maintaining a healthy body and mind, regularly hitting the gym to stay physically fit. He immerses himself in books and podcasts that inspire him to become the best version of himself, constantly seeking new ways to expand his horizons and knowledge.

With a genuine desire to become the best version of himself, Ronaldo is committed to continuous improvement. He sets personal goals, embraces challenges, and seeks opportunities for growth and self-reflection. Ultimately, combining his passion for cryptocurrencies, dedication to learning, and commitment to personal development, Ronaldo aims to go hand-in-hand with the exciting new era that the emerging crypto technology is bringing to the world and societies.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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