The price of cryptocurrencies NEO, OMG, and ETP crashed as much as 90% in minutes on the Bitfinex exchange before quickly bouncing back to former levels.
A “flash crash” on the world’s biggest cryptocurrency exchange has left customers demanding answers and refunds, with many claiming to have lost thousands of dollars.
The price of cryptocurrencies NEO, OMG, and ETP crashed as much as 90% in minutes on the Bitfinex exchange on Wednesday before quickly bouncing back to former levels.
The price crash led Bitfinex, the world’s largest cryptocurrency exchange by daily volume, to close the positions of many traders who had placed leveraged bets on these digital currencies. Leveraged trading involves borrowing money to increase exposure. It can lead to outsized gains compared to how much you deposit, but also outsized losses.
They claim that Bitfinex’s platform was hit by delays and technical issues at the time of the “flash crash,” leaving many powerless to respond. Traders are also upset that the crash only appeared to happen on Bitfinex and are suspicious of what caused it. And many say stop losses — automated sell orders meant to activate once an asset price reaches a certain floor and therefore limit losses — were executed at prices well below those set by users.
Bitfinex argues that it was functioning as normal and the company’s terms of service include provisions to close out positions once leverage ratios fall below 15%. The company puts the “flash crash” down to the volatility of cryptocurrency markets.
The spat highlights the high-risk nature of cryptocurrencies, which have attracted huge interest and ballooned to more than $300 billion in 2017 but are subject to wild price swings and are largely unregulated. It also comes at a time when British Virgin Island-registered Bitfinex, which had trading volumes of $54 billion last month, is facing increasing public scrutiny.