Some of you may have noticed the price drop for Ethereum on GDAX earlier today. It happened at around 3:30 PM EDT. Piecing together information after the fact, it looks like one seller sold 13,000 ETH (or more) at market price which ate up every single BUY order in the book.
That on its own is crazy enough. Someone was willing to spend what was priced around $4 million to crash the price and create panic in the market leaving nothing but sell orders remaining and causing another rapid sell off. GDAX has since been taken down with the following message from their support team:
We're currently investigating sign in issues on GDAX.com, as well as the cause of rapid price movement on the ETH-USD order book.
It remains to be seen what will happen after trading resumes or if Coinbase will do anything to try to remedy the situation. There were also a bunch of buy orders with some as low as $0.10 that were filled. Someone was able to purchase 11,000 ETH for $1,100 that is now worth over $3 million.
Some people have speculated that this was an ICO company selling off their ETH or a whale trying to manipulate the market to get more ETH for themselves, but I remain skeptical. A company with large holdings in ETH would be very careful about how and when they cash it out to USD. Dropping it all at once creates mass panic, and would be bad for the market in general. Sure, they could be a scam ICO company that plans to just take the money and run, but I find that unlikely. A whale is more likely, but they also benefit from not scaring people away from the market. If everyone else sells because they are scared then they stand to lose money too.
So that brings me to my theory. It is a bit out there, I will admit. I think there are large banks that are involved in crypto currencies for the sole purpose of trying to scare people from investing. Who has the most to lose from people investing their money in crypto currencies? Big banks. I suspect they have played a role in the market bubble that we have experienced in the last couple months and some of the mass selloffs we have seen. They are terrified of another financial recession and people moving their money to crypto currencies. The $0.10 buy orders could have been a way to kill two birds with one stone. Make a large profit, and scare people away from crypto currencies.
I posted a similar theory on reddit in the ethtrader daily discussion, but it seems to have gotten removed without any notification which I find very suspicious.
Anyway I came here to share it without risk of it being censored. I love a good conspiracy theory. Curious what everyone else thinks while we wait for this story to play out…
UPDATE Coinbase/GDAX resumed trading at around 7PM EDT and the price rebounded a bit
UPDATE 2 Some people suspect that the sell order was originally sent over from this wallet:
https://etherscan.io/address/0x7d551397f79a2988b064afd0efebee802c7721bc
UPDATE 3 Coinbase has responded. See my follow-up here