Huobi Talks About Lessons Learned from Socialized Losses
Following the July 10 DDOS and CC attacks at OKCoin, the topic of socialized losses and the negative impact they have on trader’s accounts has come to light again. On Friday, OKCoin announced a 55% socialized loss on the futures contract for Litecoin. Last year BitVC suffered losses of 47% — and quite a backlash as a result. Generally these incidents occur because of the massive speed and volatility of the price dump. A “system loss” results, caused by high leverage and low liquidity. It’s important to note liquidations are not market orders. So when the price moves excessively and the....
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There is a trend emerging in the bitcoin trading landscape. The trend is towards higher and higher leveraged products. If you do not have leverage or zero trade fees at your exchange, then you can expect to see tumbleweed go by every day. Give the users leverage or zero fees, otherwise expect exchange death. Stigma – Socialised Losses and high leverage. There is a chance of Socialized losses when trading at some futures platforms with high leverage. When there are a lot of liquidated positions, the system can be at a loss. To prevent the system from losing money everybody that made a....
The current lull in the price of bitcoin is an opportunity to reflect on lessons learned during these experiences.
Futures trading platform BitVC has altered the way it handles forced liquidation risk management, replacing the 'socialized system losses' method that was sometimes unpopular with users. The platform, a subsidiary of Chinese exchange Huobi, says it will implement a new method called 'automatic counterparty deleveraging'. A BitVC representative said the system is the first of its kind in the high-leverage bitcoin futures market and, while still not perfect, offers a significant improvement over other risk-management strategies in similar markets. Automatic reduction of leverage. He went on....
Bitcoin mining is an industry that has evolved immensely and there’s much to be learned from that journey.
The lessons to be learned from bad investments are the same lessons that lead people to believe in Bitcoin.