Regarding the BTMX price volatility on March 30 2019, BitMax.io has reviewed the relevant transaction data from 08:00 to 9:30 UTC. The following summarized key statistics, data analysis, and further action plan to enhance overall risk management for user protection in margin trading.
Key Trading Statistics
Price volatility on March 30 from 08:36 – 09:07 UTC, lasting 31 minutes. Based on market data analysis, there were two phases:
Phase 1 Volatility Formation (21 min) – 08:36 to 08:57 (UTC).
· Price down 19.2% by continuous selling pressure from regular trading.
· Total traded notional of 3.72 m USDT; 88.2% of those seller-initiated.
· 24.8% of seller-initiated trading volume from liquidation orders.
Phase 2 High volatility (10 min) - 08:57 -09:07 (UTC).
· Price down 59.3%, driven by liquidation orders.
· Total traded notional of 5.28 m USDT, 80.9% of those seller-initiated volume.
· 87.4% of seller-initiated trading volume were from liquidation orders.
Summary of Data Analysis
The price drop in Phase 1 was primarily driven by user-initiated sell orders, with one client accounted for 23.4% of all seller-initiated volume. 84% of seller-initiated volume from top 50 users.
The price drop in Phase 2 was primarily driven by liquidation orders, 64% of seller-initiated volume from top 50 users. Although users accounts had different levels of risk exposure, the margin liquidation process were applied consistently to all the user accounts.
Process for Users with Net Balance less than Initial Margin Requirement after Forced Liquidation (same as relevant section in the margin rules)
When net asset of Margin Account cannot cover the loan payment after forced liquidation, Margin Account trading is not permitted. And the following limitation will be imposed to the Cash Account: the trading function limited to sell-only; The withdrawal function to be disabled. Otherwise, there is no impact on both regular and margin trading functions.
Additionally, please note that 1) for those users with BTMX token in both cash and margin accounts, they can still lock them up for data usage reward; 2) the platform will not directly deduct the asset from the user Cash Account to cover the negative balance post forced liquidation.
Future Action Plan
Based upon the holistic data review and root cause analysis, the platform has decided on the following action plan in the near term to further strengthen the risk management for margin trading:
- New risk limit at individual user account level, including 1) Maximum Borrowable by currency for each user account (implemented 8pm EDT March 31) and 2) Maximum Borrowable Cap across all currencies for each user account.
- Enhance risk management monitoring mechanism on the platform for margin trading across all the users.
- For all institutional users, there will be additional requirements for credit extension in margin trading, including additional KYC review and more collateral posting for higher leverage ratio.
- Potential increase collateral requirement for higher leverage ratio (such as 10x leverage).
The platform greatly appreciates all your support and feedback since the launch of margin trading. With lessons learned from this incident, BitMax.io hopes to build more robust and resilient margin trading model for all the users. Please stay tuned for our announcement on the implementation details of the action plan in the near future.
Thank you for the continued support.