Taking a Look at the $238 Million Wreckage at BitMex
The cryptocurrency sphere is rife with speculation that perhaps, Facebook's Libra wars with the US legislature is behind the plunge. Some analysts, however, are pointing their fingers to the current activity going on at BitMEX. Data shows that there has been $238 worth of long liquidations at the exchange.
Furthermore, there is speculation that whales are reaping significant profits by crushing long and shorts, leaving the unschooled trader with massive losses. There has been a record-breaking all-time high open interest in Bitcoin futures. The activity has pushed the token's value to an 18 month high. This has forced a large number of BitMex short sellers to liquidate their positions quickly.
The Chicago Mercantile Exchange (CME) data shows that Bitcoin futures trading activity has ballooned amongst institutional traders. On June 20, for instance, CME BTC futures had 5,827 contracts traded in a day. These contracts were worth 29,153 Bitcoin or $280 million in fiat. The optimists have been taking long positions while the bearish trader has been on the shorts.
Smaller BitMex traders Took Out Long Positions
The Commodity Futures Trading Commission (CFTC) has said in the past that the whales and hedge fund managers have been taking bearish positions. The Wall Street Journal has also reported that in the frenzied BTC futures activity in June, money managers and hedge funds held over 14 percent more bearish positions than they did bullish long positions.
These traders have been bearish since BTC breakout in February 2019. This stance does not necessarily mean that the trader is betting against an asset. A short bet is also part of a hedging strategy. This means that a whale account with a BTC portfolio could go short at BTC futures as an insurance against the value drop of Bitcoin.
In contrast, smaller investors have been bullish. The Wall Street Journal said that traders with less than 25 BTC were mostly taking long positions outnumbering short bets by four to one. This group of traders is experiencing significant losses from the falling prices of the token. The system at BitMEX is now liquidating open margin trade positions that have hit the maximum losses of the position taken in the trade. This helps the stakeholders to cover their losses.
Dr. Doom Takes on BitMex
BitMex allows traders to take highly leveraged positions in crypto. The high leverage brings in high rewards or losses since they are susceptible to small movements in price. Bullish traders, sure that BTC would hold above the 10K support level took highly leveraged trades. Even so, seasoned traders say that these are rookie moves that can be managed by closing positions before prices hit the liquidation level.
Outspoken Bitcoin and crypto critic Nouriel Roubini is also known as “Dr. Doom,” has stepped up his feud with BitMEX. The New York University professor of economics has claimed that BitMEX is involved in “systematic illegality.” The Seychelles registered crypto exchange's chief executive Arthur Hayes clashed with Roubini at the Asia Blockchain summit.
In a blog post, Roubini said:
“BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere…The exchange does nothing to stop this, as it profits from these transactions.”