Bitcoin Cash Launch Retrospective

We wanted to follow up with our customers about the launch of Bitcoin Cash on GDAX. Despite our best efforts to create a fair and orderly market, the launch did not go as expected and we understand why many of our customers and members of the community are upset. To provide transparency, we wanted to share a detailed timeline of events, additional information about the decisions we made, and our thoughts about improving future launches.

Decision to Support Bitcoin Cash

On August 3, 2017, we announced our intention to allow customers to withdraw their Bitcoin Cash (BCH) balances by January 1, 2018. While we committed to supporting BCH withdrawals at that time, we delayed our decision whether or not to support BCH trading to a later date so we could better assess the health of the Bitcoin Cash network and evaluate BCH using our Digital Asset Framework.

Over the following months we monitored the Bitcoin Cash network. We observed factors such as network security, developer support, and customer interest in order to assess network health. We also evaluated BCH using our Digital Asset Framework, considering factors such as BCH’s existing global trading volume against Sect 4.1 “Liquidity Standards” and Sect 4.2 “Global Distribution”. We concluded that Bitcoin Cash met the standards in our Digital Asset Framework to be traded on GDAX.

On November 13th, 2017, employees were notified of the decision to support BCH trading and were explicitly prohibited from buying and selling BCH. All employees were also barred from sharing this information with anyone outside of Coinbase. This approach is modeled after best practices at other financial institutions and captured in our employee trading policy.

Launch of BCH Trading

We announced our decision to support BCH trading on December 19, 2017. The following outlines the timeline of events that occurred:

December 19, 2017

4:06 pm PST: We announced that GDAX would enable support for BCH trading on three new books: BCH-USD, BCH-EUR and BCH-BTC. In accordance with our Trading Rules these books opened in ‘post-only’ mode. This mode allows orders to be placed but not filled — establishing liquidity, encouraging price discovery, and mitigating the risk of a volatile market opening.

5:15 pm PST: We announced our intention to enable trading on the BCH-USD book at 5:20pm PST. We made this decision based on the BCH-USD book achieving a minimum liquidity target needed to enable trading.

5:20 pm PST: The BCH-USD book opened for active trading and orders began to be matched.

5:23 pm PST: We paused trading on the BCH-USD book due to significant volatility caused by heavy market buy demand that resulted in insufficient liquidity.

In the 2 minutes and 40 seconds the BCH-USD book was open for trading:

• 4,443 orders were placed

• 3,461 matches occurred

• 2,202 market orders executed

• $15.5 million USD of trading volume occurred

During this period, nearly 90% of all market orders were buy orders. This resulted in a thinning of liquidity and a rapid increase in price on the BCH-USD book.

The chart below displays the number of market buy vs. market sell orders in 6 second intervals. The BCH-USD price increases closely correspond to periods where market buy orders represented nearly 100% of market orders.

Market Buy (blue) and Market Sell (red) orders vs. BCH-USD price on GDAX from 5:20–5:23pm PST on 12/19/17

6:30 pm PST: We announced that the BCH-USD, BCH-EUR, and BCH-BTC books would move to ‘cancel-only’ mode and all open orders would be cleared. The BCH-EUR and BCH-BTC books never achieved our liquidity minimums needed to enable trading so no trades ever occurred.

December 20, 2017

8:56 am PST: We announced our intention to open the BCH-USD, BCH-EUR, and BCH-BTC books in ‘post-only’ mode. We also adjusted the liquidity minimums needed to enable trading based on the previous day’s market behavior.

11:00 am PST: We enabled trading on the BCH-USD book. This market has been operating in an orderly manner since this time.

7:41 pm PST: The BCH-EUR and BCH-BTC books failed to achieve our liquidity minimums needed to enable trading. Both books were moved to ‘cancel-only’ mode and open orders cleared.

December 21, 2017

7:01 am PST: We opened the BCH-EUR and BCH-BTC books in ‘post-only’ mode.

3:37 pm PST: The BCH-EUR and BCH-BTC books failed to achieve our liquidity minimums needed to enable trading. Both books were moved to ‘cancel-only’ mode and open orders cleared. We announced our intention to disable the BCH-EUR and BCH-BTC books until after the holidays when there would be a higher likelihood of meeting liquidity standards needed to enable trading.

Announcement Strategy

We are committed to building the world’s most trusted digital asset exchange and we approach the process of supporting a new asset seriously. This is especially true when deciding to support an asset that is created from the fork of an asset already supported on GDAX. For example, we believe it’s important to minimize potentially disruptive events while customers do not have access to the forked asset. This belief drove our decision to announce our support for BCH trading only once all customers had access to their BCH.

Looking Ahead

Our mission at Coinbase is to create an open financial system for the world. As we work towards that mission, we will continue to improve our product and processes and welcome customer feedback. You can reach out to us via Twitter or at support@gdax.com.