Interesting Bitcoin Whale Trades Highlight Shortcomings of Exchanges & Crypto Trading

Recent, huge Bitcoin trades have generated a lot of chatter from the Cryptoati.

Not too long ago, an enormous sum of BTC “woke up” and moved around $720 million worth of Bitcoin. Speculation is that it represents crypto from the Silk Road days. That represents a significant percentage of Bitcoin float and an amount that can easily move markets if the holders attempt to liquidate.

One recent trade in particular is interesting due to the speculation that the trader is using a hedge to drive some pretty cool gains (if you are the trader).

There is a good post on Medium that explains it all but, in brief, a leveraged transaction of $416 million on OKEx was rolled up as the exchange shut down the transaction when the account did not hold enough crypto to cover the exposure.  The trader in question had $20.8 million in digital assets and OKEx extended $395.2 million for the trade.  When the trade went sideways, OKEx took over the position and the trader was out their $20 million. But due to the size of the position, the market is simply not large enough to absorb a sale thus OKEx is in a bind. This creates significant downward pressure on the price of BTC.

The cool thing about the transaction is the fact there is speculation that the trader had offset the long position with a short on many other exchanges thus hedging his or her position. The “sell wall” of all that Bitcoin means the short is doing well for the trader but OKEx is stuck holding the digital bag.

OKEx is an exchange with a clawback policy, so when situations like this occur, it can take traders profits to cover their losses. This clawback will probably not please OKEx traders. The cost to the innocent traders was pegged at $15 million. Richard Gardner, CEO of Modulus, believes OKEx (and other exchanges) need better management. If not,  “they put the whole industry at risk.”

This is the type of trading that wouldn’t easily take place on a fully regulated exchange and thus highlights the risks of unregulated digital asset marketplaces. But then this is the world of crypto.

If you are interested in reading more on this go to the blog posts here

Sponsored Links by DQ Promote

Send this to a friend