OKEx Confirms ‘Clawback’ On Huge $416m Bitcoin Position, Introducing New Measures

Avi Rosten

A massive bitcoin long position on OKEx, one of the world’s largest cryptocurrency exchanges, that left futures traders vulnerable has prompted the exchange to launch new measures to combat similar situations in the future.

Originating with a huge $416 million-leveraged long position on bitcoin (BTC) futures, the exchange was forced to liquidate the account after the price of bitcoin tumbled earlier this week.

The problem for traders on the platform however, came from the fact that the exchange uses a socialised trading model – known as a ‘clawback model’ - where profitable traders can be forced to cover the losses if a position is liquidated.  

In the case of this particular position – this meant that at the time of settlement at 16:00 Hong Kong time – profitable short contract holders on the platform have been forced to cover some of the loss.

Prompting quite a substantial reaction on social media and crypto-trading circles, OKex released a statement this morning addressing the situation, explaining that with respect to the “unusually large” position, “only users who have a net profit across all three contracts for that week will be subject to the clawback,” and adding that to reduce market risks, they are taking the following steps:

 

1. Injecting 2500 BTC from OKEx’s own capital pool into the insurance fund.

2. During the settlement at 4pm August 3, 2018 (HKT), if any attempts of malicious manipulation of the settlement price are found, we will delay the sett

 

Furthermore, the exchange announced that they are implementing new measures to help prevent these situations occurring in the future – including an “Anti Manipulation Policy” to be implemented from tomorrow, and a “Tiered Margin System & Optimized Process of Forced Liquidation.”

Bullish News?

Interestingly, this episode might offer some encouragement to investors who have been disappointed by this week’s bearish slump in the price of bitcoin from its heights last week at over $8,000 - if some of the price slide might be attributed to traders trying to force the liquidation of this particularly large position.

hour_CryptoCompare_Index_BTC_USD_337_11533292666886.pngSource: CryptoCompare

With bitcoin and cryptocurrency markets looking expectantly this month at the hugely anticipated SEC decisions on bitcoin-ETFs, it will be interesting to see how markets react to the news.