Users Should Avoid Trading on Kraken at all Costs (Pt. 1)

Markets Jun 29, 2020

Individuals may remember that there was an article being passed around the crypto space about a week or so ago that alleged that there was a ‘Bitcoin Bug’, which resulted in some crazy wicks to the north and south of a candle on the Kraken exchange Bitcoin market.

Below is a link to an article by CoinTelegraph detailing the mess:

Below are a couple of screenshots from the ordeal:

In the pictures above, we can see that the price of Bitcoin touched down to a price as low as $8,000, with a wick up to the north at a price as high as $12,000.

From the session low of $8,000, that’s a 50%+ jump in price. From $12,000  to the ‘equilibrium’ (market) price of approximately $10,300 — Bitcoin depreciated by approximately -14%.

What makes this price action remarkable is that this trade activity was not reflected on  any other exchange at the time.

Thus, whatever was going on, on the exchange was due entirely to some phenomena occurring on the exchange alone.

Kraken Twitter Thread Explaining the ‘Bug’

After the wild and inexplicable price action in the Bitcoin markets, Kraken addressed the issue in a series of tweets (seen below):


Quick Summary:

  • Kraken claims that the wild fluctuation in price in the Bitcoin markets was due to a ‘bug’ that arose from an ‘unreleased order type’, which resulted in the “order’s prices being matched against the wrong side of the book”
  • Apparently, this ‘bug’ led to some clients buying at the ‘tester’ price of $8,000, while others were able to sell at $12,000 without “clearing the intervening liquidity”
  • Apparently, only one trade executed at the ‘high’ ($12,000) and ‘low’ ($8,000) of the session [according to Kraken]

It is difficult to verify the claim that there was only one trade at the ‘high’ and ‘low’ of the session (which begs the question of how those trades were fulfilled; i.e., who was the counterparty to each trade?).

However, what is more troubling is the fact that this pattern of wild price fluctuations is  nothing new when it comes to Kraken.

Kraken Has a Lengthy History of Fraudulent Market Activity and Questionable, Opaque Practices

This report will begin by taking a look at some of the more prominent instances of ‘flash crashes’ on the Kraken exchange over the past two years (there are countless instances apart from the ‘bug’ that was discussed above).

The point of bringing up these numerous ‘flash crash’ occurrences is to provide justification for our skepticism that the Bitcoin flash wick (going in both directions) on September 14th, 2019, was some sort of aberration on Kraken’s exchange.

In addition, this report will evaluate the following improprieties on Kraken’s exchange:

  1. The pending class action lawsuit by aggrieved customers
  2. The two lawsuits pending against Kraken for their failure to honor employee agreements
  3. Jesse Powell’s (CEO of Kraken) seeming indifference to the presence of trade/market manipulation on the Kraken exchange
  4. Kraken’s failure to institute any substantive controls in an attempt to reduce/minimize market manipulation
  5. Kraken’s failure to submit any information to the NYOAG (New York Office of Attorney General) when they were conducting an exchange survey in Q4 2018; this, among other factors, resulted in Kraken and two other exchanges being referred to the New York Financial Services for improprieties related to Kraken
  6. The massive amounts of money laundering / wash trading that take place on Kraken’s exchange
  7. That idiomatic nature of the USDT/USD markets on Kraken (notably, this is still the only viable market in all of crypto that allows for the swap of USDT to USD)
  8. Kraken allowing traders to use their markets free of KYC / AML for years (one of the reasons they were referred to New York Financial Services [NYFS] by the acting New York Attorney General at the time; circa Sept. 2018)
  9. Kraken’s obfuscated / rarely-mentioned relationship with Crypto Capital Co. (federally indicted payment processor)



Happy to serve and help wherever I'm needed in the blockchain space. #Education #EthicalContent #BringingLibretotheForefront

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