JAN 25, 2024
OKX to compensate service users following flash crash
OKX is set to compensate users after its native exchange token, OKB, experienced a rapid 48% flash crash on Tuesday.
OKB price fluctuation
The crash occurred within a brief three-minute window, triggered by a series of liquidations resulting from an abnormal price fluctuation. During the event, OKB’s diluted market capitalization plummeted by $6.5 billion.
At around 9 a.m. GMT on Tuesday, the price of OKB dropped from $46.80 to $25.10, representing a 48% decrease within 15 minutes. However, the token has since recovered, currently trading at $47.63 at the time of writing. The crash led to the triggering of liquidations for large leverage positions, causing a cascading effect on pledged loans, leverage transactions and cross-currency transactions.
OKX responded promptly, pledging to fully compensate users for any additional losses incurred due to abnormal liquidation. The exchange aims to launch a specific compensation plan within the next three days, taking into account users who engaged in on-chain trades. In a statement on Tuesday, the platform suggested that it is committed to enhancing “margin position tier rules, risk management controls and liquidation mechanism” to prevent similar issues in the future.
The flash crash coincided with a day of notable price swings across cryptocurrency markets, partly driven by the Grayscale Bitcoin Trust’s (GBTC) sale of bitcoin to meet investor redemption demands on its exchange-traded fund (ETF). Additionally, the bankrupt crypto exchange FTX has been selling nearly $1 billion worth of GBTC ETF shares recently, further contributing to market volatility.
Focusing on compliance
OKX has been actively focusing on regulatory compliance in recent times. On Dec. 29, the exchange announced the delisting of several privacy coins, including Monero (XMR), Zcash (ZEC), Dash (DASH) and Horizen (ZEN). Subsequently, on Jan. 2, the platform introduced additional requirements for United Kingdom users to comply with the new Financial Conduct Authority (FCA) regulations, including the mandatory completion of risk assessment questionnaires before engaging in trading activities.
Flash crashes are a common occurrence in cryptocurrency markets, often attributed to thin liquidity distributed across multiple venues. The 2% market depth for OKB indicates that a sell order exceeding $224,000 could potentially trigger another price cascade.
Notwithstanding that, oftentimes it can be difficult to pinpoint the precise reason for a flash crash. In 2021 global crypto exchange Kraken experienced a flash crash that saw token prices drop by in excess of 50% over the course of one hour before recovery was achieved. While some suggested it was caused by a technical glitch, Kraken founder Jesse Powell dismissed that notion, pointing instead to the possibility of a large-scale sell-off by a service user.
Despite this recent challenge, OKB remains a significant player in the cryptocurrency space, boasting a market cap of $2.8 billion, making it the fourth-largest exchange token in circulation, according to CoinGecko.