Poloniex Announces BTC Margin Lending Pool Resulted in $13.8 Million in Losses
In a recent Medium post, crypto exchange, Poloniex shared a loss incurred in their BTC Margin Lending pool – one amounting to 1800 BTC or $13.8 Million (as per current conversions). The team has since found the source and shared the following:
On May 26, a sudden, severe price crash in the CLAM market caused a number of margin loans to default, resulting in a roughly 1800 BTC loss in the Poloniex BTC margin lending pool for non-US customers.
— Poloniex Exchange (@Poloniex) June 6, 2019
In addition to the cause of crash, the team expounded on the reasons why the losses incurred followed by the number of steps they’ve taken in resolving the issues.
Starting off with the possible reasons why such a heavy loss was incurred, the team has shared two of them as being:
“Velocity of the crash and the lack of liquidity in the CLAM market made it impossible for all of the automatic liquidations of CLAM margin positions to process,” adding that another possible reason could be, “the total loan value, which was collateralized in CLAM.”
The latter reason simply means that both ends of the stick more or less meet, that is, both borrowers’ positions and their collateral experienced a significant drop in value. The duo is what supposedly prevented borrowers from repaying their loans.
Some of the measures that the Poloniex team have since taken to resolve this issue includes:
- Requesting borrowers to repay the BTC owed to lenders
- Exploring ways to help affected lenders
- Removing margin trading for 4 assets (BTS, CLAM, FCT and MAID) to protect lenders
- Adding additional layers for processing purposes and to better monitor risk in margin markets
- Adding more market protection to prevent effects of price “slippage and over-concentrated positions”
Ever since the post was made available on Twitter, users have since questioned Poloniex, with many arguing that the exchange could lose its users to other crypto exchanges or stressing their inexperience in the field as a con. Here are some of the sentiments that have been expressed:
Poloniex closed the operations with a bitcoin to 7740 dollars, they open it when it is 7500 and they refuse to open operations … how much more of this?
— Gran (@GranRethory) June 6, 2019
Seems fair to let the customers to take the hit for your shitty programming. I have a feeling you will lose a lot of them to other exchanges that have backup funds.
— 🦚Satstackr (@Satstackr) June 6, 2019
Something something listing illiquid markets on margin?
It's sad how poloniex seems to be run by total crypto newbs since it was acquired.
— binaryFate (@binaryFate01) June 6, 2019