Update 10.6.2021 14:00 (CET)
All Crypto Strategies affected by the ETC trading anomaly have been compensated.
Previous Friday - May 7th, 2021 - some of our users experienced an unforeseen circumstance regarding ETC price while rebalancing their Crypto Strategies. We immediately responded to the situation and mitigated most of the damage. After a careful review, we will be explaining the situation in depth through this blog post.
Core Concepts to understand
Price fetchers are services that run on the ICONOMI backend and continuously fetch prices for each ICONOMI listed asset on several exchanges. Average prices for well-known assets like BTC or ETH are therefore calculated from up to 16 price sources - the biggest global exchanges.
The asset price on the ICONOMI dashboard (for example BTC) represents the average price from the top global exchanges. The average price is updated once per second. While users rebalance and include assets (e.g. ETC) in their structure, our trading engine is aware of several order books on different exchanges. This allows our trading engine to select the exchange with the best price and order book depth big enough to execute the desired order. Keep in mind that the average price is also used to draw the asset charts.
What happened on May 7th, 2021?
On Friday, ETC was subject to a substantial price increase in a very brief period of time. At that time, one of the exchanges used for trading ETC was Poloniex. At the time of the ETC price increase, Poloniex transfers were disabled (ETC deposits and withdrawals), resulting in a lack of usual arbitrage between exchanges.
As a result, Poloniex ETC price deviated significantly from the average price displayed on our website and charts. During the price rise, several of our users added ETC to their Crypto Strategies. Since our trading engine always looks for the best price, we executed several buy orders on Poloniex, where the price was lowest.
With that said, ICONOMI users have encountered the following situation:
- ETC was bought on Poloniex, where the price was the lowest
- Poloniex was excluded from the typical price arbitrage, which resulted in the price deviation of approximately 30%
- Average price and charts for ETC on our website were higher than the price provided by Poloniex
- We were unable to move ETC from Poloniex to another exchange
What actions have we taken so far?
As soon as our system alerted us about the ETC deviation, we disabled the Poloniex market and “forked” all Poloneix acquired ETC to ETCPOLO. Doing so, we were able to ensure all users that bought cheap ETC on Poloniex still kept the same price that was ensured by Poloniex. From our change onwards, everyone else was buying ETC from other exchanges (such as Binance and Coinbase). Everyone else from that moment was buying ETC from other exchanges (such as Binance and Coinbase).
How were our users affected?
Scenario A - User bought and sold ETC on Poloniex:
Some users bought and sold ETC via Poloniex. In such a case, the user’s ETC amount was not affected, and since the price on Poloniex did increase, users closed the day with profit. While these users are profitable, they were still affected by average price and chart discrepancy. Meaning that the chart was displaying higher prices than were traded.
Scenario B - User bought ETC with an average price and later received forked ETCPOLO at a lower price
Some users bought ETC via our internal order matching engine and paid the average price as displayed on the website. Later, their ETC was the subject of our internal fork, where we forked all ETC to ETCPOLO and locked it to ETC price on Poloniex. This resulted in a significant price drop and direct loss, especially in those cases where users later sold ETCPOLO.
Scenario C - User bought ETC with Poloniex price (lower price) and made trading decisions according to our average price
Some of our users bought cheap ETC via Poloniex and later monitored our average price and charts, hoping to sell ETC on those prices. This scenario ended in different possible ways:
- Some users sold ETC on Poloniex, directly profiting from the price increase on Poloniex. However, profits were lower than projected to the user who was monitoring our average price chart
- Some users sold ETC on our internal order matching engine for the average price, directly profiting from the price increase (average ETC price was higher than the price on Poloniex)
- Some users sold ETC on other exchanges, directly profiting from the price increase (all other exchanges were trading at a higher price than Poloniex)
How are we solving this situation?
We will review all trades created by users during the problematic period and calculate whether the user's initial value was affected by the situation. In such cases, users will be directly compensated with the missing ETC, swapping ETCPOLO for ETC.
Users that bought cheap ETCPOLO and still hold ETCPOLO In their strategy have 2 options:
- Speculate ETCPOLO will achieve higher value once Poloniex releases transfers (deposits, withdrawals), resulting in arbitrage to level the price and sell ETCPOLO once that happens
- Immediately sell ETCPOLO that is still trading higher than it was at the point of the fork, and either turn it to any other available asset or simply add ETC to their structure. Newly added ETC will be traded on other exchanges (excluding Poloniex).
What is the difference between ETC and ETCPOLO right now?
If you buy/sell ETC in your Crypto Strategy structure right now, our trading engine will buy/sell ETC on all supported exchanges and our internal order matching system, with an average price - as displayed on our website - with the exception of Poloniex.
If you buy/sell ETCPOLO in your Crypto Strategy structure right now, our trading engine will trade it exclusively on Poloniex - with the price of ETC on Poloniex - as displayed on our website.