TL;DR: San Francisco-based cryptocurrency exchange Kraken revealed what it characterized as a “bug” impacting live orders. “Some clients bought from the tester at $8,000 and others sold at $12,000 without clearing the intervening liquidity,” potentially allowing traders to buy and sell BTC at a significant advantage over its hovering near $10,000 market price.

Kraken Reveals Order Type Trading Glitch

“Yesterday a test of an unreleased advanced order type encountered a bug which resulted in the order’s prices being matched against the wrong side of the book,” Kraken explained. Basically, it was possible for a time to catch BTC at a relative steal, some $2,000 below market price, and then “sell” it for a song, some $2,000 above the day’s normal ask.

1/3 Yesterday a test of an unreleased advanced order type encountered a bug which resulted in the order's prices being matched against the wrong side of the book. Some clients bought from the tester at $8000 and others sold at $12000 without clearing the intervening liquidity. pic.twitter.com/iG3sEPCVXS — Kraken Exchange (@krakenfx) September 14, 2019

“While the candle gives the impression that liquidity was exhausted between $8-12k, the wicks on either side are hollow,” Kraken assured. “A trade executed at the high and low but there were not trades throughout and there were no other orders that were not matched that should have been. Stops in the range of $8-12k were triggered. Stop market orders were correctly filled at market price (best bid/ask available).”

As of publication time, the broader BTC market outside of Kraken appears largely untouched by the event — some analysts worried such a snafu could lead to disastrous arbitrage opportunities under the right circumstances. BTC remained sideways, flat, however, if not even slightly lower, but still right around its recent floor of $10,000.

Pretty Mental to Run Tests Like This on the Live Market

Critics of the exchange charged into comment sections, asking, “Whose idea was to run tests on your production environment? Which ‘clients’ had a chance to buy BTC at $8000 and sell at $12000, while the market price was around $10,250?” Another concurred, “Pretty mental to run tests like this on the live market. To hell with stability.”

Kraken CEO Jesse Powell, never one to shirk from controversy, has a solid reputation in the ecosystem as something of a straight shooter by cryptocurrency standards. “You’re arguing for going straight from test env to full public rollout without a production limited beta?” he asked in return. “You have to go to prod at some point. This particular feature had already seen thousands of tests over several months. This just reinforces our careful, staged approach.”

A commenter asked directly how, after so many tests over such a relatively long period could such a bug arise. Wouldn’t it have failed during staging as well? “No matter which ‘unreleased advanced order type’ we’re talking about here,” that commenter argued, “your engine should simply not allow an order to be executed 20% above the lowest ask, or 20% below the highest bid. That’s against the very fundamentals of how order books work.” To the point, Powell agreed, “Right, hence the testing,” he shot back.

You Can’t Find All the Bugs All the Time

When still more comments piled-on Kraken and Powell, accusing them of “poor testing process combined with a poor matching engine,” the now fully engaged CEO rebutted, “So, because a bug is discovered in a limited production beta once every few years it means there’s no testing? Our new order types undergo thousands of automated and human tests for months before they make it to prod. You can’t find all the bugs all the time.”

When accused again of shoddy testing processes, Powell reiterated forcefully, “All production software is in testing all the time, which is why there are things like bug bounties, patches, updates. We take a very careful, staged approach to releasing software and this feature was already heavily tested before its prod limited beta test.”

Still more comments flooded-in, suggesting Powell and Kraken were ruining their business reputation and should admit to mistakes having been made. “Testing against live customer funds? How are we to believe this hasn’t been the cause of past flash crashes? How can anyone trust your order matching system?” was a sentiment put forward by more than a few. Powell appeared to shrug at the outrage, attributing the bug to the cost of doing his kind of business, and stressed again all would be well before resuming beta. As for those who might have lost funds or otherwise had an issue, Powell pointed them to submitting a support ticket.

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