One Ethereum trader just made $1,140,000 in seconds, thanks to an epic glitch

Yesterday, a market where people trade the Bitcoin-like cryptocurrency Ethereum crashed instantly.

The value of Ether (the Ethereum currency) plunged from about US $300 to $0.10 in seconds. Then it bouncing right back up to $300.

Here's how this extremely unlikely event unfolded:

Around 2:30 pm EST the price of Ether — which had been trading on the GDAX currency exchange at around $300 — suddenly dropped to $0.10. The official explanation is that a trader placed a multi-million dollar order to sell Ether.
In the chaos, computers sold off Ether in automated, price-triggered "sell" orders. Traders lost millions of dollars.
But one trader had an automated "buy" order telling computers to buy 380 Ether if it ever dropped so low as $0.10.
Within a few minutes, the price of Ether completely recovered to around $300. This meant that the 380 Ether the trader had just bought was now worth $1,140,000. The trader had made a 300,000% return within a few minutes.

We've had "flash crashes" like this before (2010's sudden Dow Jones price drop of 9%). But nothing of this magnitude, where an asset lost 99.96% of its value in a matter of seconds.

And in case you're wondering, no — GDAX is not issuing refunds or reversing any of these trades. Here's their official explanation of what happened.

All this leaves some lingering mysteries:

Why did the price of ether crash so suddenly and so completely? Did someone intentionally manipulate the market with the multi-million dollar sell order?
Why didn't GDAX have countermeasures in place to stop trading once the price started falling? If these countermeasures were indeed in place, did they fail to kick into effect?
Did the person behind this extremely profitable trade create the $0.10 buy order as part of some broader strategy of exploiting extremely unlikely black swan events? Or did they just create it as a practical joke, never expecting for the price of Ether to drop that low?
Who were they? Did the same person place both the multi-million dollar sell order and the buy order at $0.10 knowing it would crash the system? Since the holders of Ethereum "smart contracts" are anonymous, we may never know.

You can read how cryptocurrency traders reacted to this transaction here.

And if you want to read more about algorithmic trading, I highly recommend Michael Lewis's book Flash Boys: A Wall Street Revolt.

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