Cryptocurrency exchange OKEx has made the bold decision to settle its Bitcoin Cash futures contract early, closing thousands of users’ positions without warning.
The decision was made to protect customers against volatility surrounding the upcoming Bitcoin Cash hard fork, which could bring a ‘large-scale impact’ such as a ‘cascade liquidation’.
A cascade of liquidations is where the price of futures wildly fluctuates from the underlying spot price due to a continuous stream of liquidations. OKEx suffered issues relating to this in August when they force-liquidated a Bitcoin futures position size worth around $400 million This devastated the futures market and caused a cascade of liquidations.
SPECIAL ANNOUNCEMENT: All Bitcoin Cash (BCH) futures contracts will stop trading at 9:05am and be delivered at 10:00am Nov 14, 2018 CET (UTC +1) due to the upcoming hard fork. We will provide a detailed explanation shortly.#OKExAnnouncementhttps://t.co/yh3p46tirc pic.twitter.com/oqioSUOUsf
— OKX (@okx) November 14, 2018
Coinbase suffered a similar issue in 2017 with the Ethereum flash-crash, which saw the cryptocurrency crash from $317 to just $0.10 in a matter of seconds, before bouncing back up to $300.
However, OKEx’s decision has caught many off-guard. In an attempt to defend itself in an official statement it said: “The final outcome of the BCH hard fork is still unpredictable, and so are the responses of other constituent exchanges to the new forked coins. Between the hard fork and the delivery data of BCH1116 contract, OKEx may lack time to respond to the market.”
It continued: “It has come to our concern that an early announcement may make room for market manipulation and cause loss to our users. Therefore, we decided to give a short notice in order to maintain the fairness and stability of the market. OKEx will never perform any early delivery without prior notice, except for extremely special cases like the BCH hard fork.”
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