BitMEX supports mass liquidation event in BTC Price Crash
March 23, 2020 5:20 pm
Bitcoin (BTC) derivatives exchange BitMEX remains to handle objections after trying to explain a mass liquidation experience through which BTC/USD dropped 60%.
In a blog post on March 23, BitMEX asked what it says were “a number of questions” from traders after the event happened 11 days ago.
BitMEX insurance fund
BitMEX seemed to experience from what various sources have called a cascading margin call, bursting out traders and maintaining the price of Bitcoin falling in the process. Then the market went offline for about half an hour, after which the price regained.
Later opposing off allegations of foul play, BitMEX yet encountered questions over why its giant insurance fund — a bank of above 35,000 BTC ($205.6 million) — was not managed to help.
Describing its purpose, the blog post declares that the fund’s primary purpose has constantly remained the same: to prevent auto-deleveraging (ADL) of successful traders’ positions to block the bankruptcy of positions that go liquidated.
“It is important for the Fund to be large enough to absorb intraday shocks, to avoid ADL on the platform.”
Questions Arise on the Size of Funds
Replying to the post, Twitter-based trader lowstrife clarified that questions remained about BitMEX’s methods of working.
“The main question I raise here is why the insurance fund, when the worst-case scenario almost happened, was barely used,” lowstrife commented.
“Which raises questions of why it’s so large, and it’s overall efficacy. Here we arrive at the limits of my knowledge and opinion.”
According to Chart from Skew, Market witnessed the highest number of liquidations in BitMEX records at $876 million on March 12 and noticed the second-highest liquidations at $798 million, the day after.