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Ex-Employee Accuses Alameda of Triggering Bitcoin's 2021 Plummet

Sep 22, 2023 at 11:14 am

A former employee of Alameda Research has alleged that a trader at the company made a critical decimal error, resulting in Bitcoin's price plummeting by over 87% on Binance.US in 2021.

The disgraced trading firm, Alameda Research, is said to be responsible for the incident that caused Bitcoin's price to suddenly drop in 2021. This revelation comes from a former employee who is shedding light on the inner workings of Sam Bankman-Fried's company.

On October 21, 2021, Bitcoin experienced a rapid and unexplained drop on the crypto exchange Binance.US, leaving traders bewildered. During this event, Bitcoin's price fell from approximately $65,760 to as low as $8,200 within minutes, only to quickly recover. At the time, a spokesperson from Binance.US attributed the crash to a bug in the trading systems of one of their institutional traders.

The identity of the trader had remained unknown until now, but recent tweets from the former Alameda Research employee suggest that the trading firm may have been the cause.

According to Baradwaj, while most of Alameda's trades were executed using algorithms, there were instances when traders could manually place orders, particularly during times of market volatility or to seize a profit opportunity. This is where the apparent mistake occurred.

"The trader was trying to sell a block of BTC in response to the news, and sent out the order via our manual trading system," Baradwaj explained in a tweet. "What they missed was the decimal point was off by a few spaces. Rather than selling BTC at the current market price, they sold it for pennies on the dollar."

Arbitrage traders swiftly capitalized on the pricing error and restored Bitcoin to its normal levels. However, Alameda suffered losses amounting to millions of dollars.

As of now, neither Baradwaj nor Binance.US have provided further comments on the matter.

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