Deribit Exchange Causes Flash Crash, Compensates $1.3M to Traders

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Deribit, a newly launched derivative exchange, saw a one-off event that wiped out Bitcoin (BTC), flash-crashing the price to $7,700 while filling orders all the way down. The sudden price anomaly saw the price return immediately to above $9,000.Deribit has announced it will cover the losses from its own funds, not resorting to the insurance fund for derivatives: flash crash may erase the value of any asset to almost zero, and has happened for BTC and Ethereum (ETH) a few times in history. Because of automated orders, BTC is vulnerable to those events. Deribit explained that its algorithms should have excluded an outlier value from the calculation of the reference price, to use a more fair value for the futures.Fortunately, the loss was small, and Deribit continues to operate. The exchange did not have its domain seized, as a FUD tweet suggested on November 1. trading algorithms caused cascade effects…

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