A former employee of Alameda Research has disclosed that the now-defunct quantitative trading company was responsible for an abrupt 87% drop in Bitcoin prices during 2021. This incident transpired on October 21, when Bitcoin, the world’s largest and oldest cryptocurrency, inexplicably plummeted to as low as $8,200 on the Binance.US platform.
Unraveling the 2021 Crash of Bitcoin on Binance.US
A former Alameda Research staff member has shed light on the true cause behind the unprecedented flash crash of Bitcoin in 2021.
According to Aditya Baradwajan, a former engineer at Alameda Research and a trader within the firm, the crash occurred due to an accidental misentry of a Bitcoin sell order on Alameda’s manual trading system. This error involved a misplaced decimal point, causing a significant amount of BTC to be sold at a fraction of its actual value at the time.
The consequence of this blunder was immediate and dramatic. On October 21, 2021, the price of Bitcoin on Binance.US plummeted by a staggering 87%. Within minutes, the cryptocurrency went from its previous high of $65,000 to a mere $8,200 per coin on the platform, while other Bitcoin markets continued to operate normally.
At that time, the crypto exchange attributed the flash crash in price to a “bug” in the trading algorithm of an institutional client, attempting to shield Alameda from blame for the error.
This sudden and severe price action sent shockwaves throughout the crypto market, leaving investors scrambling to comprehend the situation. Fortunately, the Bitcoin price swiftly rebounded as arbitrageurs exploited the pricing anomaly. Nevertheless, Alameda Research incurred “tens of millions” in losses as a result of the unfortunate trade.
Baradwajan remarked, “Because it was an honest mistake, there was little to be done except to implement additional safeguards for manual trades. And that is precisely what we did.”
Meanwhile, Sam Bankman-Fried (SBF), who co-founded Alameda Research and its affiliated firm, FTX, is preparing for his first criminal trial, scheduled to commence on October 3. His second trial is slated to begin in March of the following year. Despite facing multiple charges, the disgraced crypto tycoon has pleaded not guilty to all of them.