BitMEX had an interesting move today before settlement on their Daily contracts which caused another uproar from traders similar to their first DPE experienced last week. The price dumped from $470 down to $400. The problem? Well, let's look at the spot market to find out:
Bitfinex tumbled from $466 down to 440. Still a hefty bounce at about 6%, but not the 14% drop that BitMEX Dailies saw.
A massive 35% whack to all profitable traders on this daily settlement -- ouch! These are the kind of socialised losses we saw on OKCoin back in the late 2014 and early 2015. The mark price system appears to have functioned but bots went crazy and sold down to $400, which instantly margin called people selling at 100x around that price when spot did not drop to $440.
So the mark price system of BitMEX worked in this case, but it caused lots of liquidations which ended up not being filled and caused socialised losses when the price went up to $460s.
Perhaps with the current price environment and liquidity on BitMEX these DPE's will become a more regular occurance. Or maybe 100x is a little too high leverage to be offering if it becomes really frequent.
Traders have differing opinions on this but most support socialised losses in exchange for safe access to high leverage. It just gets more difficult to defend the more times it occurs especially when more than 1/3 of profits are being taken in events like this.
So the mark price system of BitMEX worked in this case, but it caused lots of liquidations which ended up not being filled and caused socialised losses when the price went up to $460s.
Perhaps with the current price environment and liquidity on BitMEX these DPE's will become a more regular occurance. Or maybe 100x is a little too high leverage to be offering if it becomes really frequent.
Traders have differing opinions on this but most support socialised losses in exchange for safe access to high leverage. It just gets more difficult to defend the more times it occurs especially when more than 1/3 of profits are being taken in events like this.
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