An own trade in SK Hynix stock led to the forced liquidation of $60 million in cryptocurrency contracts
A sudden drop in the share price of a South Korean chipmaker this week taught the cryptocurrency industry a painful lesson. Before the Seoul stock market opened on Tuesday, SK Hynix's share price plunged 30% from the previous trading day's closing price. The reason was a stock changing hands at an unusual price during pre-market trading. Although the transaction price subsequently recovered significantly, it was too late for a group of traders trading in another area outside the public market. Blockchain data platform Allium said the price of a derivatives contract linked to SK Hynix shares traded on cryptocurrency exchange Hyperliquid fell by about 20%, causing long positions holding the contract to be forced to liquidate nearly $60 million in two minutes. Allium estimates that the incident resulted in actual losses of $17.4 million for more than 900 users. Trade.xyz, the developer of the contract, said in a statement that it will "bear the liquidation losses caused by abnormal price fluctuations." "Although the system worked as designed, users were apparently unhappy with triggering liquidation," Trade.xyz said. "We will further improve the pricing system in the future to deal with extreme situations." The incident highlights the structural contradictions faced by one of the fastest-growing products in the cryptocurrency space: perpetual futures contracts. Such derivatives can provide 24/7 leveraged exposure, even if the underlying asset itself is not traded 24 hours a day like cryptocurrencies. Currently, both traditional financial institutions and digital financial companies are trying to introduce more assets into the blockchain trading system in this way, including stocks, U.S. Treasury bonds, and commodities.