- OKX experienced a significant flash crash, with its token plummeting by 48%, from $46.80 to $25.10.
- In response, OKX has pledged to compensate affected users for the abnormal liquidation losses.
- OKX prioritised regulatory compliance and announced new FCA regulations for UK users.
In less than 15 minutes on Tuesday morning, the price of OKB fell 48% from $46.80 to $25.10, wiping away $6.5 billion in diluted market value. Since then, the token price has increased and is now trading at $47.94, according to CoinGecko statistics.
Flash crash due to a liquidation cascade
Crypto exchange OKX saw the prices of its token OKB flash crash from $46.80 to $25.10 on Tuesday. OKX said in a statement that the high volatility was the result of the automatic liquidation of several margined positions after the token price dropped from $50.69 to $48.36. “After touching $48.36, the liquidation of multiple large leverage positions was triggered successively,” stated OKX staff. The market impact led to a cascade effect, causing currency prices to fall and triggering liquidation across pledged loans, leverage transactions, and cross-currency transitions. This series of events ultimately drove the token’s price down to 25.10 USTD.
The price of OKB, the token issued by cryptocurrency exchange OKX, quickly dropped from $46.80 to $25.10 on Tuesday. In a statement, OKX stated that the reason for the significant volatility was the automatic liquidation of several margined positions. According to OKX personnel, “The liquidation of multiple large leverage positions was triggered successively after touching 48.36 USTD.” A cascading effect from the market impact resulted in falling currency prices, which in turn sparked liquidation across pledged loans, leverage transactions, and cross-currency transactions. This sequence of events caused the token’s price to drop to $25.10.
Also read: Navigating bitcoin markets: concerns VS. opportunities
Exchange pledged full compensation for abnormal liquidation losses
“Full compensation for additional losses caused by abnormal liquidation” is the exchange’s commitment. Within the following 72 hours, a comprehensive compensation plan is scheduled to be revealed to show the exchange’s ability to resolve the aftermath of the flash collapse.
Also read: Renowned Director Stephen Chow Ventures into Web3+AI with OKX Collaboration
OKX’s regulatory focus
Over the past year, OKX has concentrated on regulatory compliance. The exchange declared the delisting of privacy cryptocurrencies, including Monero, Zcash, Dash, and Horizen on December 29, 2023. Furthermore, the company said in January that users in the United Kingdom will need to comply with new regulations set forth by the Financial Conduct Authority (FCA). One of the criteria is that users must complete risk assessment questionnaires before trading.
The flash crash episode highlights the difficulties and unpredictability that exist in the cryptocurrency market. The durability and resilience of investments in digital assets are called into doubt by the current market volatility.
