OKEx liquidation Issues

The top contract holder at OKEx , one of the largest crypto echange in terms of volume , had accumulated a $460 million long position before he was liquidated on July 31st. This big a position being liquidated is a big story in itself but the main issue here is that that the liquidation did not get filled in the market. A roughly $420 million overhang exists in this weekly settlement period that impacts all three maturities on BTCUSD Futures, is waiting to be filled just above $8000.

OKEx features a “clawback policy,” which means that when a trader’s margin balance reaches zero, the policy kicks in and the exchange will make a concurrent limit order at the current exchange rate. If this order remains unfilled by the time of settlement, profitable traders will have to cover the cost, which most probaly are traders on short contracts.

OKEx has 10 btc in their insurance fund, which they would used to reconcile situations like the current one. Unfortunately the liquidation has resulted in a 950 btc loss. Since the insurance fund of 10 BTC will not cover the loss, OKEx will need tp make a decision on how they plan to reconcile this liquidation sitting on their books.

If BTC’s connot embark on an upward move to 8k to fill the liquidations, this massive wall will have to be dealt with by using a clawback. if this were to happen , OKEx users will will not be a happy bunch and will move to different trading platforms and shorters will close their positions as they do not want to be held responsible for the payback procedure.

For now it seems that $BTC will continue to trade in the mid to lower 7K range in until Okex makes a decision