Sun. Aug 7th, 2022

BitMEX users are blaming bitcoin futures exchange BitMEX for a flash crash in the XRP cryptocurrency that cost them buckets of money. The crash, which happened on Feb. 13, saw the price of the No. 3 cryptocurrency based on market cap plunge 60% from USD 0.33 to USD 0.14 in a matter of seconds before heading higher afterward. According to traders, the backstops meant to stop positions from being liquidated weren’t triggered, leaving XRP investors holding the bag after the flash crash. If you ask Mati Greenspan, founder of Quantum Economics, BitMEX is basically off the hook. He said in a daily note:

“For once, I actually agree with BitMEX’s decision to not refund their customers. Their reasoning is only half true though. They say that it was caused by ‘market factors’, which it was. The only thing is that they are the ones who created the market.”

Source: Twitter

Greenspan notes that flash crashes are not frequent events in traditional markets, adding that they usually happen on low trading volume. While BitMEX may not be at fault, they are not entirely unscathed in the controversy. Arthur Hayes, who is at the helm of the exchange, is no fan of XRP and has made his opinion abundantly clear. Hayes on the heels of the BitMEX announcement about a new perpetual swap contract for XRP insulted the cryptocurrency and its largest holder Ripple, saying:

Source: Twitter

BitMEX, meanwhile, reportedly offers up to 100x leverage for going long or short on XRP, upping the ante for traders who were caught in the flash crash and compounding their losses.

According to Greenspan’s explanation,

“It’s prudent to note that these high leverage XRP contracts are quite new to BitMEX and antagonistic comments from the CEO calling XRP dirty names has probably not attracted all that many clients. So the orderbook is likely quite sparse. If you have people selling and there are no buyers, the market price will then drop to the meet the next available buy order. It’s simply how markets are designed.”

Greenspan went on to sympathize with trader Marc de Koning cited above, adding,

“He does kind of remind me of someone yelling at a crooked carnival operator for rigging their games. Did you have a good time sir?”

BitMEX has gone on to defend itself as well after receiving tons of trader backlash on social media, saying in a tweet:

“We understand traders’ frustration when prices move quickly against their positions. However, we’ve investigated recent activity on our XRPUSD perp and our system performed as expected, and prevented liquidations.”

Some traders have vowed to close their BitMEX accounts, going on to accuse the exchange of being a scam. Others still said that traders didn’t understand how the market works and that they wouldn’t be complaining if long positions were filled instead. One trader tweeted:

Source: Twitter

 

The XRP price continues to fall and is down 9% as of this writing, with the broader crypto market similarly trading in the red. The crypto market took a negative turn after the bitcoin price fell from below the psychologically important $10,000 level, taking altcoins down with it.