BCH touched $8900 on GDAX and then was suspended. Not clear what they were expecting.
The main issue, other than that crazy spike, is that there was a substancial run-up in price before the announcement.
This could have been because of a leak of their APIs
, or because of insider trading from privileged information.
Trading crypto is still basically entirely anonymous if you use services like Changelly and Shapeshift, so any Coinbase customer can easily get away by trading on their own info, even if it's against their policies.
Nonetheless, they are running an internal investigation to see if anyone leaked data or acted on it. Good luck.
An easy speculation would be that Coinbase just couldn't let go of the supply of Bitcoin Cash it had. If they let everyone withdraw, that would have been a non-negligible part of their AUM.
The riskier question is: do they really have all of the BTC/BCH? I don't think they'd ever risk it by running a fractional reserve system, but these situations can make the question just a tad more legitimate.
On this last point, one of the most interesting conversations of the week has been about UTXOs (Unspent Transaction Outputs).
I'm sure you all know how BTC transactions work, but just to make sure, let's clarify:
when a transaction takes place, there are two UTXOs created: one that is the actual coins sent to the recipient, and one that is the change output, which goes back to the sender's wallet but does not get just added to the total coin amount.
In Ethereum this is different for example, you just add coins to your address.
In Bitcoin instead your wallet will have many different amounts (of different UTXOs) that all together sum to something. But you need to spend them one at a time.
Now that we cleared that up, we can see how this could be a serious problem for Coinbase and other wallet providers.
This twitter thread
explains it fairly well, but in short, Coinbase has some wallets with a massive amount of UTXOs of very, very small value. This means that oftentimes the transaction fee needed to move the coins will be larger than the value of the coins themselves, so they're as good as worthless probably.
Now, there isn't a great solution to this (Lightning and Segwit can't help much with it), so it it indeed is the case that Coinbase or other wallets-as-a-service has a lot of cash tied up in small UTXOs, then they have a massive problem, and they can't blame anyone else.
It'll be fun to watch. Our advice is always the same. Get your money outta there.