Coinbase halts Bitcoin Cash transactions amidst accusations of insider trading

Illustration by Alex Castro / The Verge

Coinbase has launched an internal probe to identify whether its employees engaged in insider trading of Bitcoin Cash shortly before the cryptocurrency was officially introduced to the exchange yesterday. Increased trading led to a spike in Bitcoin Cash’s valuation, and just four hours after its introduction, Coinbase suspended trading of the digital currency.

Coinbase’s ethics policy prevents employees from “trading on ‘material non-public information,’ such as when a new asset will be added to our platform,” wrote Coinbase CEO Brian Armstrong in a Medium post today. That includes sharing that information with friends and family. In the hours before Coinbase added Bitcoin Cash to its exchange, the price of the cryptocurrency had already begun to rise. The price for a single Bitcoin Cash coin soared past $8,000, or more than double its price a day earlier.

Armstrong warned, “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.”

Coinbase’s swift shutdown of Bitcoin Cash support came in the midst of many on Twitter raising suspicions last night about the unusual spike of Bitcoin Cash prices.

Back in August, bitcoin split into two, creating Bitcoin Cash, in what’s called a “hard fork.” The fork was backed by one bitcoin group that wanted to combat bitcoin’s high transaction fees and the size limit that made mining larger blocks of data invalid. Bitcoin users who controlled their own private keys benefited from the split by keeping the bitcoin they had along with an extra amount of Bitcoin Cash.

When the fork occurred, several trading platforms like CEX.io offered support for the new currency. But to users’ chagrin, Coinbase rejected Bitcoin Cash, with the company’s director of communications writing in a Medium post that “it is hard to predict how long the alternative version of bitcoin will survive.”

Now, Coinbase has decided to enable support for Bitcoin Cash, which has become the third largest cryptocurrency after Bitcoin and Ether in terms of market cap. Although Bitcoin Cash has seen less extreme growth in valuation than Bitcoin, which skyrocketed past $15,000 per coin this month, Bitcoin Cash’s value has steadily risen. It’s currently worth around $4,154, up from $1,500 last month.

We’ve reached out to Coinbase for clarification and will update this story when we hear back.

Comments

BCash, shady as its profit seeking creators.

Highly suspect! Looks like some people might get in trouble now…

But i thought bitcoin was supposed to save us from the evils of the financial industry ¯\(ツ)

If BCH is the only crypto with insider trading issues then I’m actually a walrus.

My shitstained underwear has more intrinsic value than cryptocurrencies.

If you can sell your shit stained underwear for $17k then you should definitely go for it.

Why stop there! Your underwear has more intrinsic value than the dollar, the Euro or any other fiat currency on the planet. What exactly was your point again?

Oh, wow…totally didn’t see that one coming!

Bitcoin is a hype based huge bubble. A few select people have made a LOT of money by constantly pushing the ‘its the future’ idea. The truth is that this token is backed by nothing and soon there will be tens of thousands of crypto coins backed by nothing.

On top of that people dont use Bitcoin for anything except investment. Transaction volume has stayed the same for ever.

The fact that barely anyone is using them for transactions has me worried about it.

This article is trying to combine two stories into one.

Coinbase’s backend still needs help with it’s bch trading pairs. GDAX has been trading the bch/usd pair since yesterday morning. GDAX has been on degraded service for pretty much all of December.

The gains in the bch/btc pair were increasing after this was posted 4 days ago:

https://www.reddit.com/r/btc/comments/7kfzbi/attn_bitcoin_cash_added_to_coinbase_api_extremely/

I’ll concede the price increase did accelerate as it got closer to coinbase supporting BCH, but I think part of that was just the momentum of the market.

Hey Verge, if you want to hire me to write your crypto stories for you(or do fact checking), I’m available.

In the Libertarian world of cryptocurrency, wouldn’t insider trading be a good thing? I thought the whole idea was to be decentralized and unregulated.

High BTC prices are detrimental to the currency. It makes cashing out expensive AF due to the ridiculous 0.01 BTC fee that needs to be paid to the miners that handle the ledger.

That’s almost $157 at current price just for the transfer fee required to cash out…
That might be nothing for someone who has $16’000 worth of bitcoin (just over 1 bitcoin), but for someone who just wants to sell a small item and convert, it’s very impractical.

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