OKB Flash Crash Wipes Out $6.5B In Minutes, OKX Vows to Reimburse Traders

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Trent Alan

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Trent Alan

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Trent has a background and education in journalism and communications, with two decades of experience editing and writing on a diverse array of topics. In recent years, however, he has shifted his...

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January 23, 2024 13:28 EST

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In a major crash that shocked traders, the OKB price dropped over 50% within 15 minutes on January 23, wiping out $6.5 billion in diluted market capitalization. The dramatic freefall occurred around 4:00 am EST, with the token plunging from $52.02 to $25.10 on leading exchange OKX before rapidly recovering.

OKB Price Crash Caused by Snowball Effect

OKX stated on Twitter

that the crash was triggered by successive liquidations of multiple large leveraged positions after OKB touched $48.36. The resulting market impact snowballed into further liquidations of pledged loans, leverage trades, and cross-currency transactions, sparking the major selloff.

Today, OKB experienced unexpected volatility. The market has quickly stabilized, and we're actively developing a compensation plan, set to be finalized within 72 hours.

We apologize for any inconvenience caused and are committed to enhancing our risk management protocols.… pic.twitter.com/GxJ2M0dOS3

— OKX (@okx) January 23, 2024

OKX has promised to “fully compensate users for additional losses caused by abnormal liquidation,” with details of reimbursement to be announced within 72 hours.

Bitcoin ETF Launch Fails To Stop the Fall

The startling OKB flash crash happened during heightened volatility in crypto markets, mainly stemming from Grayscale Bitcoin Trust’s continuous sale of Bitcoin to meet heavy redemption demands.

Bankrupt exchange FTX offloaded nearly $1 billion in GBTC shares as it’s working to commence creditor repayments, maintaining constant pressure on Bitcoin’s price since the launch of long-awaited Bitcoin ETFs on January 11.

OKX itself has devoted considerable effort towards regulatory compliance over the past year, highlighting the increasing scrutiny of crypto by regulators. On December 29, 2023, the exchange announced delistings of privacy coins like Monero and Zcash. Just days later, it mandated risk assessment questionnaires for UK users to adhere to new FCA prerequisites before trading.

As the crypto industry continues to weather unsteady conditions post-Bitcoin ETF launch, the unpredictable OKB crash demonstrates lingering vulnerabilities. Traders are left stunned by the swift unraveling of market value, awaiting OKX’s detailed compensation plan.