Deribit, an Amsterdam based cryptocurrency exchange experienced a flash crash on its platform on October 31st due to an error in their system for pricing the Bitcoin futures contracts. The exchange agreed to reimburse the customers for their mistakes which cost them $1.3 million.
The error in the order book plummeted the Bitcoin futures price to $7,720 from $9,150 before it jumped back up to the market price soon after. The exchange rapidly took action and released an official blog post apologizing for the mistake caused by a “bug” along with the announcement for reimbursement worth $1.3 million.
Since then the exchange has fixed the issue and has put in extra precautionary measures in place to avoid any similar instance in the near future. John Jansen, the CEO of the platform during a recent interview said that the decision to reimburse customers was made because it was the right thing to do.
Deribit specializes in providing derivative market trading for Bitcoin and other cryptocurrencies via Futures and Options contracts. The platform puts customers' satisfaction and loyalty as its top priority and hopes to become a market leader in the space based on those values.
Jansen termed the recent mishap as a wake-up call and hoped any similar issue won't arise in the near future.
“We really don’t want this to happen again. This was like an expensive or maybe a cheap wake-up call.”
Later analysis found that Deribit which uses several crypto exchanges price index experienced the crash when two of these exchanges went offline, which led to a miscalculation leading to the blunder.
Jansen said that the mistake was on their part and thus customers needed to be compensated for their losses. As a result of the reimbursement, many traders made a handsome return on their trade as the exchange did not take back the money made by them for the same trade.
Many Users tried to Milk the Reimbursement Offer
Jansen during the interview told that while those who suffered losses were rightly compensated, but many even tried to recover the losses they incurred on legitimate trades.
“We had to draw the line at some point. There were also some users claiming back their losses off the whole day.”
When enquired about the motivation behind reimbursement Jansen noted that it is a fast-growing industry and highly profitable too, and in the future, the trading will be concentrated to a selected small group of exchanges, thus the competition is quite fierce.
“You always have to treat your customers correct. There are always alternatives to go to.”
Many market watchers believe the decision to compensate the customers was right, and the amount was nothing in comparison to what these exchanges generate via trading fees and other services.
Greg Ciplaro, the co-founder of the Digital Asset Research, a crypto market analysis firm, said,
“They understand that this is a competitive market, there are high dollar stakes, and $1.3 million to make customers whole probably pales in comparison with the amount of revenue they make.”