FTX and Alameda are two companies currently fighting for bankruptcy and court cases at many different levels. So, a former Alameda employee provided an insight into the company’s daily operations before the collapse.
Former Alameda Employee Exposes the Failed Crypto Exchange
- A former Alameda employee made an expose of how the failed crypto exchange made the price of Bitcoin fall to less than 87%. So, this person on Twitter with the username @aditya_baradwaj made a very detailed post explaining how FTX and Alameda made manipulations to the crypto market.
- Alameda was the trading arm of the FTX exchange before the collapse. Baradwaj explained how the firm made most of its trades on the crypto market. So, Alameda traded cryptocurrencies using either the automated methods or the manual method. Their major trading pattern was semi-systematic strategies, where traders set model parameters that control a complex automated trading system. So, when using this type of trade, traders aren’t placing actual trades but rather fine-tuning an algorithm that decides how to execute the trades at high frequency.
- According to this former Alameda employee, traders helped with the manual and automated trade. However, automated trade was the main preference.
Former Alameda Employee Narrates How FTX and Alameda Made a Massive Mistake
- This former Alameda employee explained how the two companies made a mistake that made Bitcoin’s price go down by more than 87%. So, on October 21, 2021, an Alameda trader’s finger slipped. This trader made this mistake when engaging in the manual method of trade. So, this trader was trying to sell a block of BTC in response to the news and sent out the order using the manual trading system.
- There was an error in the trade. So, this trade that made this particular trade for Alameda sold Bitcoin for a very low amount of money. The former employee narrating this said the sale was in pennies. So, this had a massive effect on the Bitcoin price.
- Within a short period, the price of Bitcoin declined from a high of $65k to as low as $8k on some venues. However, those engaging in arbitrage trading in the crypto market were quick to restore the price. But it was still a noticeable occurrence. Popularly known as the Bitcoin flash occurrence, back then in crypto Twitter, this occurrence caused a lot of surprise among many enthusiasts.
Sam Bankman-Fried and Caroline Tried Patching it Up
- This former Alameda employee explained how the leaders of FTX and Alameda patched up the unfortunate event. So, Alameda made huge losses from this fat finger event.
- On the occurrence of this event, it was like many news outlets were reporting the opposite of the happenings. So, this former employee said the suspicion is that FTX and Alameda leaders made some calls to cover up the whole situation. The official cause of the problem was that it was a bug in the trading algorithm.
- In conclusion, many things happen behind the scenes in the crypto market. However, the ones with FTX and Alameda were mostly negative. This narration from the former Alameda looks like the post-mortem explanation of what happened that day.
Featured image from Coinpedia
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