Unfilled BTC Long Position on OKEx Leaves Shared Debt
A whale dropped a massive $460 million long position on OKEx this past Tuesday that liquidated due to the recent BTC price dip and now might leave other futures holders to pick up the debt.
Due to OKEx’s ‘socialized loss clawback‘ responsibility system, the liquidity of those with short positions is used to balance any minor loss on long positions and vice versa. In practice, that system should work but bets of this size should never be allowed.
OKEx has an insurance policy for such an event but it only covers up to 10 BTC. The losses incurred with this completely irresponsible bet amount over 950 BTC.
OKEx apparently tried to warn the anonymous user who instigated the position to retract it, without success. The exchange eventually attempted to cancel the position but it, unfortunately, was too late. As a result, fellow futures traders have been left holding the ball in a situation that could see them lose as much as 50 percent of their own profits.
Reddit user TheSwapMan covered the story on /r/BitcoinMarkets in a post entitled “The $415 Million Elephant in the Room.”
As he mentions in the post – “This is catastrophic”.
In order to have leveled the losses the market would have had to regain its previous value by 16:00 Hong Kong time today, August 3, which clearly didn’t happen.
Wider Market Implications
The implications of such a loss could massively tarnish OKEx’s reputations as well as that of the cryptocurrency community within the wider financial ecosystem. Manipulation such as this, whether intentional or not, is exactly the reason regulators like the SEC are wary to grant approval for wider market instruments such as a bitcoin ETF.
OKEx is reportedly implementing changes to its margin system and liquidation procedures in order to minimize the size of forced liquidation positions and reduce the number of clawbacks.
At 17:00 pm UTC today, August 3rd, Coin Market Cap recorded a massive spike across cryptocurrency markets, briefly pushing the price of BTC up to around $8,500 and cutting $25 million of the market cap before stopping it’s graph price monitoring altogether. Whether this is related or simply a glitch is yet to be seen.
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