Key facts
- Trade.xyz will cover $60 million in crypto liquidations.
- The liquidations occurred after the SK Hynix perpetual futures contract price dropped 19%.
- The exchange attributes the price drop to a single trade on a thin Korean pre-market venue.
- Trade.xyz stated its oracle system functioned as designed, relaying a real but outsized trade.
- The decision to cover losses is a one-time, discretionary action.
- Trade.xyz will reassess its price sourcing methods.
Decentralized perpetuals exchange Trade.xyz announced it will reimburse traders for approximately $60 million in liquidations that occurred after its SK Hynix perpetual futures contract experienced a sudden 19% price drop. The exchange attributes the incident to a single, large trade executed on a thin Korean pre-market venue, rather than a system malfunction.
The mark price for the SK Hynix contract fell from around $1,128 to $917 at 23:01 UTC on July 27. Trade.xyz stated that its oracle system correctly relayed a real trade from an independent data provider, which, due to the market's low liquidity, significantly impacted the contract's reference price. The company emphasized that this reimbursement is a one-time, discretionary action and not a precedent for future events, with specific eligibility rules to be released.
In response to the incident, Trade.xyz plans to re-evaluate its price sourcing mechanisms, intending to give greater consideration to the price formation within its own order books. This decision comes as research suggests that crypto perpetual futures can sometimes lead spot markets and price events more accurately than traditional methods.
The price crash occurred shortly before Korean equities began a significant two-day decline, with SK Hynix shares falling approximately 17% on Wednesday, despite reporting a 557% increase in quarterly profit that still missed analyst estimates.