Bitcoin futures and options provider Deribit has offered to compensate traders affected by a BTC flash crash on the exchange. The company estimates the total compensation to be about $1.3 million.
Image courtesy of Shutterstock
The move to reimburse traders who use the platform follows a glitch that affected the exchange’s perpetual swap contract on October 31 at about 21:00 UTC.
A malfunction in the index calculation system saw Deribit’s futures price plummet close to 15% to price levels near $7,700.
Bitcoin (BTC) derivative prices on the exchange dropped from $9,150 to $7,720. The sudden drop caught many traders by surprise and caused alarm. The prices, however, rebounded quickly, rising to levels above $9,000.
Chart showing flash crash on Deribit. Image courtesy of Coindesk
Deribit released a statement on their Telegram channel acknowledging the BTC index error. COO Marius Jansen noted that the issue was linked to the platform’s price index calculation system.
The exchange uses bid and ask prices on seven major exchanges to calculate an average price for its index. In this case, the system removes any outlier prices. But that appeared to have failed, the error responsible for the deletion of several stop losses and liquidations.
Coinbase Pro downtime
The issues at Deribit occurred just an hour after spot prices on Coinbase Pro, a trading platform for professional traders, also dropped sharply.
Charts show that Bitcoin prices on the platform shaved over $200 in minutes. Prices slipped from $9,260 to $9,055 at around 19:55 UTC. Coinbase Pro experienced the downtime between 19:55 UTC and 21:15 UTC.
In confirming the $1.3 million reimbursements, Jansen noted that the platform “always [wants] to do the right thing for [their] traders.” He, however, added that the compensation is a rough estimate of the profits its users make.
The money used to reimburse the traders would, apparently, not be from Deribit’s insurance fund.
Meanwhile, the flash crash saw bitcoin prices drop by nearly 2%. Prices fell to lows of $8,960 before steadying to climb above $9k. Bitcoin (BTC) currently trades at $9,152 on CoinMarketCap.com, 0.06% down on the day.
Last week BTC jumped to $10,540 as the market reacted to positive sentiment out of China when Chinese President Xi Jinping urged the country to accelerate its development and adoption of blockchain technology.