Bitcoin Collapse on Binance.US: A Revealed ‘Fat Finger’ Error
Aditya Baradwaj, a former developer at crypto hedge fund Alameda Research, has revealed what he describes as the true reason behind Bitcoin’s infamous flash crash on Binance.US in October 2021. Contrary to the narrative of a ‘bug in a trading algorithm’ pushed by a Binance.US spokesperson, Baradwaj discloses that an unfortunate ‘fat finger’ typing mistake by an Alameda trader caused the dramatic price drop. The event saw Bitcoin’s trading price plunge from $65,760 to a staggering $8,200 in an instant, before bouncing back just as quickly.
The Financial Consequences: Alameda’s Error Costs Millions
The anonymous Alameda trader made the mistake while manually entering a Bitcoin sell order in response to unspecified news, Baradwaj stated. By missing the comma, the trader sold Bitcoin ‘for a bargain,’ resulting in massive losses for Alameda. Baradwaj described the financial consequences as ‘staggering,’ claiming the losses were ‘in the order of tens of millions.’ Despite the severity of the error, the company treated it as an ‘honest mistake,’ implementing additional checks for manual operations in the future.
The Risk Culture Behind Alameda and FTX
Baradwaj’s revelations also shed light on the broader risk-taking culture in companies led by Sam Bankman-Fried, including the now-defunct FTX Group. ‘This was generally how things were done at Alameda – we waited for something to break, and then rushed to fix it,’ he revealed. This reactive approach allowed Alameda to ‘move fast,’ but also led to a lack of common-sense preventive checks that traditional trading firms would have in place. This, according to Baradwaj, reflects Bankman-Fried’s philosophy that ‘the utility we gained from moving quickly outweighed the occasional costs we paid due to poor risk controls, hacks, etc.’
