Coinbase Halts Bitcoin Cash Over Insider Trading Probe

What Is Bitcoin Cash & Why Is Everyone Freaking Out About It Right Now?Dan Kitwood  Getty Images News  Getty Images

Before the announcement, prices for Bitcoin Cash began climbing in other markets, and now a self-investigation of possible insider trading has been initiated. Until yesterday, Coinbase only participated in three markets - Bitcoin, Ethereum, and Litecoin.

As the bitcoin offshoot soars, cryptocurrency start-up Coinbase is commencing an internal investigation. "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", wrote the CEO of Coinbase Brian Armstrong. Coinbase insisted it operates a strict insider trading policy. Within minutes, trading for the coin was suspended due to what GDAX characterised as "significant volatility". Bitcoin itself tumbled about 10 percent after the news late Tuesday in the United States and registered its biggest one-day drop in about three months.

On other exchanges, such as Kraken, bitcoin cash traded at about $3,600 on Wednesday.

Bitcoin cash was the result of a so-called "hard fork" - a split in the original network underpinning bitcoin - that occurred in August. "Our launch of Bitcoin Cash today is no exception to this". Attempts to contact the creators of bitcoin cash were unsuccessful.

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While Coinbase briefly enabled orders to be posted in U.S. dollars on its platform for more sophisticated traders, it suspended the facility after two minutes due to 'significant volatility, ' the company said in a blog post. At the time of publishing this article, the price of a Bitcoin was $17,659.29.

Traders originally grew suspicious when the bitcoin cash value took a sharp upturn in the hours leading up to the company's announcement, with many suspecting that individuals with insider knowledge of the event procured bitcoin cash at a low rate prior to the launch. Bitcoin Cash is now the third largest cryptocurrency in terms of market capitalization, sitting at more than $29 billion compared to bitcoin's more than $294 billion.

As of Wednesday morning ET, the ability to buy or sell Bitcoin Cash remained disabled on Coinbase, though customers could transfer it to other digital currency wallets. As smaller miners become overburdened financially, they turn to Bitcoin Cash, or the "second Bitcoin", analysts say.

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