Can somebody explain the 415 million USD liquidation on OkEX to me in plain english?

Hello – I am trying to understand what happened exactly on the 31st of July when a position worth of 415 million USD got liquidated on OkEX. Can somebody please explain to me in plain english?

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What I understand is that this person had 4,15 million long contracts on Bitcoin, each worth $100, making the total value 415 million dollar. My first question is: what did he buy? Did he buy contracts that settle on a certain date for the given price (futures)? Or did he simply buy Bitcoin? My second question is: I assume there was leverage in play? What was his leverage in this position, x10, x20? x20 seems to be the highest leverage available on OkEX so I then conclude that his bet was at least privately funded for about 20 million usd?

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From what I understand, the price sank afterwards. I guess it sank 5% and therefore triggered liquidation if he used a leverage of x20. OkEX now tries to sell everything he longed in order to take the borrowed amount for the leverage back. But the market is not liquid enough to completely fill this order. Im still not sure what we are talking about at this point, Bitcoins or future contracts, so I don’t know what the market looks like. If its Bitcoin, I guess they can just market sell the rest and the losses will be limited and their insurance fund can cover for it. If its future contracts, idk, who the * buys that stuff anyway? I guess you need to sell those future contracts at the liquidated price, meaning other people would bet at that point that the price from that moment on until expiration will increase. We’re probably talking futures, because that would make sense if the counterparty of the contracts will eventually pay for this ‘social loss’ by sacrificing an amount of profit.

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So what about the theories circling around right now? I guess a huge ‘future contract sell wall’ has appeared on OkEX at that time. OkEX tries to get rid of lets say 380 million contracts at a price of 6,000 USD per Bitcoin. But if the price continues to drop nobody will obviously be interested in these contracts as they will probably sell with a loss on expiration date. Am I right about this? And if yes, how does this influence market prices, and how can somebody use this to push the market into one specific direction?

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Would be nice to see someone explain, trying to learn here! 🙂



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3 Comments

  1. misureddit
    September 5, 2018
  2. Jip1210
    September 5, 2018

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