A former employee of Alameda Research has revealed the reason behind the major collapse of bitcoin price, which was 88% in 2021.

A former employee of Alameda Research has revealed the reason behind the major collapse of bitcoin price, which was 88% in 2021.

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Author: Robert Strickland (crypto-journalist)
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A former employee of Alameda Research has revealed the reason behind the major collapse of bitcoin price, which was 88% in 2021.

This collapse was initiated by a trader error associated with the Sam Bankman-Fried fund as well as the associated crypto exchange FTX.




Events unfolded on October 21, 2021, when the price of bitcoin on the Binance.US exchange plummeted to $8.2k, which was 88% of the previous price. After that, the price quickly recovered to a level of about $65 thousand. Interestingly, such a sharp collapse occurred in a few minutes and had no visible explanation, while other crypto exchanges did not see the same decline.



Initially, a representative of Binance.US announced that the collapse was caused by an institutional trader's error in their trading system. However, the identity of this trader remained unknown. In posts on social media, a former Alameda Research employee named Aditya Baradwaj, claims that it was their company that was behind the crash.

According to him, most of Alameda Research's trades are automated, but sometimes traders made manual transactions during periods of market volatility. In this case, a trader tried to sell bitcoins in reaction to the news, but accidentally sent an order with the wrong parameters, causing him to sell the cryptocurrency at a severely undervalued price.

Arbitrage traders quickly restored the bitcoin price on the exchange to its current level, but Alameda Research suffered serious losses. Subsequently, after the bankruptcy of the FTX exchange, Caroline Allison, former CEO of Alameda Research, admitted to deliberately misleading investors about financial transactions both in her fund and on the FTX exchange. These actions were found to be illegal and she faces prosecution.

In late July, Caroline Ellison was asked for jail time by prosecutors after she handed over Sam Bankman-Fried's personal diary to a reporter for The New York Times in what is seen as an attempt to pressure a witness. She is expected to go on trial this October.

 

 

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