The world of Futures trading, with Bitcoin for the traditional Investor still very new, as this was only introduced in December of last year, when the CBOE and the CME brought their products to the market, which should mean would be a big boost for Bitcoin acceptance.
For those that have to do with crypto currencies, there was, however, already before the big CME and CBOE-introduction of appointments, the ability to trade Bitcoin Futures, and other crypto-currency – Futures. OKEx now on 3. November 2017 is actually a BTC-, BCH – and ETH-Future-trade announced.
But even with this jump on the Futures market, as the second largest crypto-currency exchange by volume, had OKEx so far, his problems with the Futures trading. First there was the 30. March abnormal classes, with whom they had to contend with. This led to a trader threatened to commit suicide if the Problem would not be solved.
Then OKEx had to deal in may with the program “Voice of China”, the China National Radio (CNR). In this, it was claimed that OKEx made illegal crypto-currency-Futures-transactions in the country, which has Essentially banned any use of digital currencies within its borders.
Recently, on 3. August, was confronted OKEx with a critical Situation in which the Wrong bet of a “whale”-a trader’s forced on Bitcoin the Liquidation of a Futures contract, which, in turn, other retailers were forced to pay the bill. The latest Problem means that those have to do with unrealized gains on their Short positions this week on a profit-loss of 18 percent in focus.
In an interview with Cointelegraph, the OKEx-Manager Andy Cheung said that this was a “valuable lesson” for him and OKEx. You are trying to continue to improve the trading experience. However, Cheung also acknowledges that it has not given a lot of impact through your Clawback mechanism and also the mood in the Futures trade has taken no damage.
Bad decision of an individual trader
Cheung led this forced liquidation of a failed Bitcoin-Futures-trading – with a nominal value in the amount of the equivalent of 358 million Euro to “just a bad decision of an individual trader”.
On 31. In July, an anonymous retailer triggered an Alarm in the risk management system of OKEx, as a Long Position has been placed with colossal 4.168.515 contracts. Due to the sheer size of the Position, the stock exchange contacted the dealer and asked him several times, “the positions are partially close to reduce the overall market risk”.
“The customer refused to freeze to cooperate, however, is what led to our decision, the customer’s account, to prevent further positions. Shortly after this preventive measure, the BTC price fell, unfortunately, what led to the dissolution of the account”, – is spoken in the official statement.
This Liquidation has the effect that the company has to pay against parties to the bill. Reason a policy for a so-called “socialized recovery” for cases in which a trade deficit occurs.
OKEx has a well-defined policy, what to do if a forced liquidation occurs. It is called:
“OKEX-Futures uses a “Full Account Clawback”System for the calculation of the repayment rate. The Margin Call losses, of the system from all three contracts will be merged and the refunds will be calculated according to the total account profit for each user, instead of calculating the Margin Call losses, and refunds for each contract separately. Only users that have a net profit on all three contracts this week, fall under the refund. Refunds will not be made only if the insurance Fund has sufficient funds to cover the entire Margin Call losses of the system.”
in Order to mitigate some of the losses, pumped OKEx immediately to 2,500 BTC (approximately 15.9 million euros) in an insurance Fund. But this was not enough to compensate damages.
in Spite of this negative incident to Futures trading, with Bitcoin as well as the costs borne by the counterparties to the “bad decision” of this anonymous dealer, says Cheung, there is no stay had caused damage.
“According to our data, we see no signs that the market was adversely affected mood due to this incident. We also see no indication that the mood of our customers has been greatly affected.”
a lesson learned
Much of what happened, was a little outside of the control of OKEx, such as, for example, the strange trade process and the volatility of Bitcoin, the forced Liquidation, but OKEx says that it was a valuable lesson for the company itself, but also traders are encouraged to understand the mechanisms.
“We would say that this is a valuable lesson for us in improving our trading experience. We encourage our customers to study the mechanism of Futures trading before you get into the game, to avoid unexpected losses.”
The Clawback mechanism is a mechanism that seems to be a somewhat unknown risk to Futures traders who plunge into the things. OKEx, however, made it very clear that this is the price to pay under certain unfortunate circumstances.
Cheung explained:
“The claw-back mechanism has been running since its introduction, neat and is used by the major stock exchanges around the world. Another important exchange that offers margin trading, BitMEX, also uses a similar mechanism, the liquidation orders closes by the positions of the degraded counter-parties to Profit and Leverage priority.
“We believe that this mechanism balances the interests of all Parties. This mechanism does not only stabilize the operation of our platform, but also insured the assets of the traders on our platform. Without this mechanism, each trading platform is in danger, along with the entire assets of the dealer.”
Nevertheless, it is for traders unhappy that they have to deal with the bad decision of another trader apart. And that is precisely why, as, Cheung, try to make these less frequent and less costly.
“Nevertheless, we strive to be the risk of a large-scale recovery in the future, auszuschließen. We have already initiated prior to this incident, a number of improvement measures. We will also do more reconnaissance for our users in the area of Futures trading, in order to understand the mechanism behind it, and well-informed decisions.”
a Long way to the destination
The Futures trading with Bitcoin and other crypto-currencies still has a long way to go before he can be considered completely fail-safe – and even then, there will certainly be mishaps. But, as Cheung says, you can learn from it, while this trade option in this new and volatile areas to develop.
Bitcoin is still a very new asset class, in comparison to other that are used in Futures. And as such, traders are also still in the experimental Phase. It will take some time until the problems that arise in this new Form of trade, are solved, but when trying to mitigate the losses, this should be a relatively painless process to make Bitcoin Futures work smoothly.
