Facing significant price instability ahead of tomorrow’s contentious Bitcoin Cash hard fork, major crypto exchange OKEx abruptly closed its BCH futures markets ahead of their scheduled expiration dates and provided early delivery to customers.
Bitcoin Cash Fork Leads to Premature Futures Delivery
The Malta-based OKEx announced the early BCH futures delivery on Wednesday, stating that it had halted trading for its BCH1116 (weekly), BCH1123 (bi-weekly), and BCH1228 (quarterly) futures products at 9:05 am CET and executed contract delivery at 10:00 am CET, irrespective of their scheduled termination dates.
The crypto exchange attributed the decision to “strong volatility” related to the impending Bitcoin Cash hard fork, which is proving to be much more contentious than many had believed it would be.
When the fork activates on Nov. 15, Bitcoin Cash will split into at least two different blockchains, providing BCH holders with funds on both chains. The so-called “official” version has been developed by Bitcoin ABC (BCHABC), while a majority of miners are instead backing Bitcoin SV (BCHSV), the version developed by Craig Wright-affiliated firm nChain and supported by billionaire Calvin Ayre.
On most platforms, BCHABC is expected to retain the BCH ticker following the fork; however, it’s likely that — at least initially — it will trade at a significant discount to the pre-fork value of bitcoin cash. This would create enormous problems for futures market operators like OKEx, as well as their traders.
“Due to the upcoming hard fork, strong volatility is observed in the BCH spot and futures markets. OKEx expects even greater volatility during the hard fork that may cause large-scale impacts, such as cascade liquidation,” the crypto exchange said in the announcement. “The final outcome of the BCH hard fork is still unpredictable, and so are the responses of other constituent exchanges to the new forked coins.”
Did the Fork Instability Catch OKEx by Surprise?
The firm decided not to warn traders that it would close the contracts ahead of their scheduled expiration dates, stating that it was afraid an early warning would have led to market manipulation.
“The BCH hard fork is an extremely special case. It has come to our concern that an early announcement may make room for market manipulation and cause loss to our users. Therefore, we decided to give a short notice in order to maintain the fairness and stability of the market.”
One gets the impression that the instability surrounding the fork caught OKEx by surprise, or else they could have purposely structured BCH contracts to expire ahead of the fork. Traders appear to be growing less confident about the outcome of the fork as well, at least according to data from pre-fork futures markets. While BCHABC had initially traded at a several hundred dollar premium to BCHSV, the gap had narrowed to just $43 at the time of writing, with BCHABC priced at $263 and BCHSV at $220.
Images from Shutterstock.
Last modified: March 4, 2021 3:10 PM