Insider trading claims
Coinbase began allowing users to buy and sell Bitcoin Cash on Tuesday evening. Immediately after the launch, the price of the cryptocurrency rose to all-time highs of around $3,600 on most major exchanges. However, users of Coinbase’s GDAX platform saw the price soar to over $8,000 per coin.
Coinbase suspended trading as cryptocurrency market watchers began to voice concerns that company employees could have been behind the price climb. Coinbase insisted it operates a strict insider trading policy. It prevented its staff and contractors from trading Bitcoin Cash for “weeks” before the launch.
In a blog post, CEO Brian Armstrong confirmed there would be an investigation though. Armstrong noted that the price of Bitcoin Cash on other exchanges appears to have started rising before Coinbase made its announcement. Coinbase said it shut down trading because of “significant volatility” observed in the hours after Bitcoin Cash’s launch.
“Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter,” said Armstrong. “If we find evidence of any employee or contractor violating our policies – directly or indirectly – I will not hesitate to terminate the employee immediately and take appropriate legal action.”
Cryptocurrency hard fork
Bitcoin Cash was created back in August as the result of a “hard fork” of Bitcoin itself. Bitcoin Cash changes one key characteristic of Bitcoin by allowing larger chunks of data to be written to its blockchain at one time. This improves transaction times during busy periods, solving one of the biggest issues facing Bitcoin as it scales.
Owners of Bitcoins at the time of the fork were rewarded with an equal sum of Bitcoin Cash. This peculiarity of the split effectively created “new” money, leading some exchanges not to support Bitcoin Cash.
Bitcoin Cash’s value has remained low compared to Bitcoin’s recent record-setting highs. Last night’s Coinbase launch appeared to reverse the cryptocurrency’s fortunes, although now association with illegal trading activity could cause it further troubles.
Coinbase said it intends to resume Bitcoin Cash trading later today. The company suspended orders on GDAX just four minutes after they began. During the brief trading window, prices spiked wildly and reached $8,500 before the marketplace was disabled. It is currently unknown whether the $8,500 quote given at the time of suspension was accurate or the result of a technical issue.
