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Over $826m Liquidated on Bitmex in 30 Days, Its Insurance Fund Grows by 1,964 BTC

Bitcoins and US Dollar bills.
Bitcoins and US Dollar bills.

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The liquidated amount on leverage trading platform BitMEX has been significant over the last 30 days. Data gathered by shows that at least $826 million was liquidated on the exchange between March 21st and April 21st, 2020.

From the data, long positions with a total Bitcoin volume of $446,120,043 were liquidated on BitMEX during the 30 days under review. On the other hand, short positions worth $380,485,690 were liquidated. In total the liquidated amount on the platform amounted to $826,605,733.

Elsewhere on Bitfinex, Bitcoin’s long positions worth $570,067 were liquidated while short positions liquidated were valued at $4,121,301 during the period under review. In total, both liquidated long and short positions were worth $4,691,368 of Bitcoin.

The total liquidation on both platforms is among the highest in the given timeframe. The massive amount in liquidation ties with a period Bitcoin experienced extreme volatility. For example in mid-April when the market was rallying Bitcoin price to settle above $6600, the top cryptocurrency spiked to around $7,100, a move that forced liquidations of futures on BitMEX.  In general, when the market faces a bloodbath, futures traders are among the worst hit.

How BitMEX liquidation system works

The liquidation system attempts to bring a user down to a lower risk limit and thus lower margin requirements through various means. For example, on BitMEX, it attempts to bring a user down to a risk limit associated with their open orders and current position or by canceling any open orders and then attempting to bring a user down to a limit linked with their current position.

On BitMEX sell liquidations occur when the market moves against long positions and breaches a predetermined limit. In this case, BitMEX’s liquidation engine is forced to liquidate long positions. On the other hand, buy liquidations occur when prices move against short positions, forcing the liquidation engine to square off bearish bets.

BitMEX has put measures such as the Fair Price Marking to avoid liquidation due to illiquid markets or manipulation. In the event, a liquidation occurs, the platform cancels any open orders on the current contract in an attempt to free up margin and maintain the position, However, orders on other contracts will remain open

BitMEX insurance fund gains by $13 million on YTD

An overview of the daily BitMEX insurance fund balance change Year-to-Date (YTD) shows that the kitty has grown by 1,964 Bitcoins ($13,654,356.48) since the first day of the year. At the start of the year, the balance was 3,305 Bitcoins ($233.7 million) and by March 21st the balance stood at 35,470 Bitcoin ($247.4 million). From the start of the year, the balance has been increasing despite some significant fluctuations along the way.

The first drop in this year’s balance was recorded on January 19th when the figure stood at 33,771 Bitcoins (235.6 million) before embarking on an upwards trajectory to hit the year’s all-time high of 36,493 Bitcoins (254.7 million) on March 13. The balance later dropped to 34,695 Bitcoins (242.2 million) on March 16. Over the past 30 days, the balance has also been increasing heading towards another high.

In general, the insurance fund fluctuated on the 12th and 13th March. It dropped drastically on the 12th and increased by higher margins on March 13th. It also witnessed a gradual decline after March 13th as the volatility in Bitcoin price remained high. This change might suggest that the volatility and liquidations do not always translate into profit for the exchange.

In the event BitMEX liquidates the position at better than the bankruptcy price, the additional funds will be moved to the Insurance Fund. BitMEX uses an Insurance Fund to avoid Auto-Deleveraging in traders’ positions. The fund is used to aggress unfilled liquidation orders before they are taken over by the auto-deleveraging system.

BitMEX is currently one of the most Popular cryptocurrency exchanges and derivative trading platforms globally. The exchange is registered in Seychelles and has offices worldwide. BitMEX launched the future trading system in 2016, a move attributed to Bitcoin reaching its all-time high of $2,000.

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