Deribit's bitcoin contract price flash crashes 15% due to an error; COO says it cost $1.3M

Bitcoin derivatives provider Deribit experienced a malfunction at 21:00 UTC of its flagship BTC perpetual swap contract, causing the price of the contract to drop 15%. Around the same time, Coinbase Pro was down for approximately 75 minutes as well from 20:00 UTC to 21:15 UTC, with some citing the downtime as the reason for Deribit's contract malfunction.

Deribit locked its platform shortly after the incident. It then announced via its Telegram channel that there were some BTC index calculation issues, caused by the platform's failure to remove incorrect outlier prices provided by an exchange Deribit works with. Although the firm did not disclose which exchange it is, it did promise to compensate clients who are negatively impacted by the error. Deribit COO Marius Jansen estimated the total cost of compensation to be around $1.3 million. 

"We always want to do the right thing for our traders. Because of this, we are reimbursing traders that got affected by triggered stop orders and liquidations. My current estimate is that it will cost us at least around $1,300,000. These are basically profits that users have been making on the platform because of our bug. Of course, we are not taking this from the insurance fund," said Jansen. 

Coinbase is one of seven exchanges used by Deribit to calculate its BTC price index, which many of its trading products rely on. According to Deribit's website, its BTC index averages the bid and ask price of these exchanges to calculate a mid-price for its trading platform—removing outlier prices in the process.

The Block has reached out to Coinbase and Deribit and will update the story once a response is received.