In an unsurprisingly eventful launch, Coinbase added Bitcoin Cash as the fourth cryptocurrency to its portfolio on December 19 and then disabled trading only four minutes later on its exchange, GDAX.
Bitcoin Cash is a clone of the Bitcoin blockchain, backed by chinese mining equipment manufacturer and mining pool operator, Bitmain, which was created via a hard fork from the mother blockchain on August 1, 2017.
Coinbase announced the news of Bitcoin Cash launching on its platform in a blog post stating that it made the decision to enable its customers to benefit from forks,
Coinbase operates by the principle that our customers should benefit to the greatest extent possible from forks or other networks events. This is essential in our mission to make Coinbase the most trusted, safe, and easy-to-use digital currency exchange.
We have been monitoring the Bitcoin Cash network over the last few months and have decided to enable full support including the ability to buy, sell, send and receive. Factors we considered include developer and community support, security, stability, market price and trading volume.
In the hours leading up to Coinbase's announcement, Bitcoin Cash valuation suddenly spiked 50% and within minutes of the currency being launched on Coinbase's GDAX platform, the valuation reached $8500. This has given rise to significant concerns and accusations of insider trading among employees at the exchange, aware of the news before the announcement.
Frantic Four Minutes of Trading
At 17:20 PST on December 19, BCH-USD trading pair was enabled on GDAX. Four minutes later, at 17:24 PST, trading was halted and the order book was placed on post-only mode.
Roughly an hour later, the trading platform placed BCH books on cancel-only mode posting the following update, “All BCH books will enter cancel-only mode, and all existing orders will be cleared. While in cancel-only mode, no new orders will be accepted. We will post an update shortly.”
A further update at 20:04 PST noted BCH markets would be offline until 9 AM on Wednesday morning, “All BCH markets will remain cleared and offline until 9am PST 12/20/17. At that time, BCH markets will enter post-only mode for a minimum of one hour to allow liquidity to be established.”
Later in a blog post, GDAX explained that trading was halted due to significant volatility and it stopped accepting further orders to ensure a fair and orderly market.
Responding to accusations of insider trading on the platform, Coinbase said it maintains a strict trading policy and internal guidelines for employees and that employees had been prohibited from trading in Bitcoin Cash for several weeks.
CEO of Coinbase, Brian Armstrong said an investigation was already underway to determine whether there had been any foul play,
“I take the confidentiality of material non-public information very seriously. Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter. If we find evidence of any employee or contractor violating our policies - directly or indirectly - I will not hesitate to terminate the employee immediately and take appropriate legal action.”