Sunday, July 14, 2024

A former member of the Alameda Research team has unveiled a significant trading blunder that had far-reaching consequences, triggering an astonishing 87% plummet in the value of Bitcoin (BTC) on the Binance US exchange. This mishap, according to the insider, resulted in staggering losses amounting to tens of millions of dollars.

The Genesis of the Binance US Flash Crash in 2021

A former colleague of Aditya Baradwaj, associated with Sam Bankman-Fried’s cryptocurrency trading entity, Alameda Research, has provided candid insights into his time with the firm. On August 23, Baradwaj made a revealing statement about his tenure in the engineering department at Alameda, where he witnessed the loss of his entire life savings, pointing a finger at Bankman-Fried. Baradwaj recounted that his personal and professional trajectory underwent a dramatic shift during his 18 months at Alameda.

On October 21, 2021, Bitcoin’s price experienced a precipitous drop, plummeting from the $64,000 range to a mere $8,200 per coin on Binance US.

Fast forward to September 20, and Baradwaj revisited an incident from October 21, 2021. On that fateful day, the value of Bitcoin (BTC) suffered a flash crash of an astonishing 87% on the Binance US exchange, only to swiftly rebound. Baradwaj detailed that an Alameda employee inadvertently placed an erroneous order, characterizing it as a “slip of the finger.”

“The trader intended to sell a block of BTC in response to breaking news and transmitted the order through our manual trading system,” Baradwaj revealed. “What they overlooked was a minor error in the decimal point placement. Instead of selling BTC at the prevailing market price, they offloaded it for a mere fraction of its value.”

Baradwaj continued:

“News outlets quickly caught wind of the situation. Binance US, which bore the brunt of the flash crash, issued a statement attributing the incident to one of their ‘institutional traders’ who had encountered a ‘glitch in their trading algorithm.’ It seems Caroline made some influential calls.”

This incident is not the first public stumble for Alameda, nor for CEO Caroline Ellison. As recently as December 2022, a whistleblower from FTX disclosed to News that Ellison’s margin account had taken a substantial hit, losing $1.3 billion in May 2022.

During a conversation with Jen Wieczner of New York Magazine, Sam Bankman-Fried discussed a specific margin position that had become unmanageably large. He underscored that the sheer size of Alameda’s margin made it “impossible to close in a liquid manner to fulfill its obligations.”

What are your thoughts on the recollections of the former Alameda employee regarding this ill-fated Bitcoin trade? Feel free to share your insights and perspectives on this matter in the comments section below.

Frequently Asked Questions (FAQs) about Bitcoin Trading Blunder

What caused the significant drop in Bitcoin’s price on Binance US in 2021?

A former Alameda Research employee revealed that an erroneous order placed by an Alameda trader, due to a decimal point error, triggered an 87% crash in Bitcoin’s price on Binance US.

How much were the losses attributed to this trading blunder?

The losses resulting from this mishap were described as reaching the “order of tens of millions” of dollars.

Who is Aditya Baradwaj, and what did he disclose about his time at Alameda Research?

Aditya Baradwaj is a former member of Alameda Research. He candidly shared his experience of losing his entire life savings during his 18 months at the company, attributing it to Sam Bankman-Fried.

Has Alameda Research faced similar public issues before?

Yes, Alameda Research has encountered previous public setbacks. In December 2022, a whistleblower reported that CEO Caroline Ellison’s margin account suffered a significant loss of $1.3 billion in May 2022.

How did Binance US respond to the flash crash?

Binance US issued a statement attributing the flash crash to one of their ‘institutional traders’ who encountered a ‘bug in their trading algorithm,’ but news outlets picked up on the incident.

What did Sam Bankman-Fried say about the margin position in Alameda?

Sam Bankman-Fried mentioned that a particular margin position in Alameda had become unmanageably large, making it impossible to close in a liquid manner to fulfill its obligations.

More about Bitcoin Trading Blunder

  • [Former Alameda Research Employee’s Revelation](link to the source)
  • [Bitcoin’s 87% Price Drop on Binance US](link to the source)
  • [Aditya Baradwaj’s Experience at Alameda Research](link to the source)
  • [Caroline Ellison’s Margin Account Loss](link to the source)
  • [Binance US Response to the Flash Crash](link to the source)
  • [Sam Bankman-Fried’s Comments on Alameda’s Margin Position](link to the source)


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