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OKX Loses $740M in 15 Minutes: A Look at Crypto’s Flash Crashes

Last Updated January 24, 2024 5:25 PM
James Morales
Last Updated January 24, 2024 5:25 PM

Key Takeaways

  • An OKB price crash this week wiped hundreds of millions from the token’s market cap.
  • The flash crash affected the USDT  trades on OKX, which account for over 70% of the cryptocurrency’s trading volume.
  • OKX said the incident was caused by a surge in liquidated margin positions.

A dramatic plummet in the price of OKX’s exchange token on Tuesday, January  23, wiped out $740 million from OKB’s market capitalization in just 15 minutes, prompting an apology from the exchange operator, which has promised to reimburse margin traders whose positions were liquidated.

Known as flash crashes, sharp price crunches affect all markets, but cryptocurrencies can be especially susceptible to the phenomenon. 

What Caused the OKB Flash Crash?

In volatile crypto markets, where wild price swings are a common occurrence, the term flash crash is reserved for the most sensational declines, often taking place in a matter of minutes. 

Crashes are typically instigated by abnormal trading activity affecting a specific token pair on a specific exchange, but they often spill over to other markets and platforms. 

For example, a statement  released by OKX said Tuesday’s event was triggered by an unusually high volume of liquidations affecting OKB-USDT margin positions. After OKB initially dropped from $50.69 to $48.36, selling pressure from liquidated short positions sent the token plummeting even further – as low as 25.1 USDT before it stabilized.

The impact on the overall OKB market was amplified by the fact that USDT swaps on OKX typically account for over 70% of the token’s entire trading volume.  

According to CoinMarketCap, which aggregates trading data from multiple sources, OKB’s market capitalization collapsed from $3.12 billion at 8:55 (UTC) to $2.36 billion at 9:10. Within ten minutes, however, it had rebounded to $2.9 billion. 

Previous Flash Crypto Crashes 

Although the OKX crash was one of the most significant, flash crashes aren’t rare in crypto.

Last year, the value of HT traded on Huobi (now HTX) plunged by 93% , only to bounce back moments later. Like the recent OKB crash, Justin Sun stated  that the incident was caused by “a few users triggering a cascade of forced liquidations.” To help prevent a repeat of the event, he said the exchange planned to set up a $100 million fund to boost the depth of HT’s liquidity across different cryptocurrency pairs.

In addition to spot prices, flash crashes can also affect crypto derivatives. For instance, in 2021 Polkadot perpetual-futures contracts listed on Binance briefly traded below $1 after plummeting more than 99%. 

The incident was the result of a single large sell order that exceeded the value of all bids at the time, a Binance spokesperson explained  at the time. 

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