The cryptocurrency exchange OKX has announced plans to compensate users affected by a flash crash in its native token, OKB, which occurred on January 23. This decision comes after the OKB token experienced a startling 48% drop in value, plummeting from $46.80 to $25.10 in less than 15 minutes, erasing approximately $6.5 billion in diluted market capitalization. However, the token has since made a recovery, trading at $45.94 at the time of publication.
The crash, which happened around 9 am GMT, was attributed to a cascade of liquidations. “After reaching 48.36 USDT, the liquidation of multiple large leverage positions was successively triggered,” explained OKX staff. “This, coupled with the market impact, caused the currency price to fall sharply, further triggering liquidations across pledged loans, leverage transactions, and cross-currency trades.”
In response to this incident, OKX has committed to “fully compensate users for additional losses caused by abnormal liquidation.” The exchange is set to release a detailed compensation plan within the next 72 hours.
The cryptocurrency market, on the same day, witnessed significant price fluctuations. This volatility was partly driven by the Grayscale Bitcoin Trust’s (GBTC) sale of Bitcoin in order to meet investor redemption demands on its exchange-traded fund. Notably, FTX, a cryptocurrency exchange facing financial difficulties, sold nearly $1 billion worth of GBTC ETF shares as part of its estate liquidations to repay creditors.
Over the past year, OKX has focused heavily on regulatory compliance. On December 29, 2023, the exchange announced the delisting of several privacy-centric coins, including Monero, Zcash, Dash, and Horizen (ZEN). Additionally, on January 2, OKX introduced new requirements for United Kingdom users to align with Financial Conduct Authority (FCA) regulations, which included mandatory risk assessment questionnaires for all traders.
This flash crash and the subsequent decision by OKX to compensate its users highlight the ongoing challenges and volatility inherent in the cryptocurrency market, even as exchanges like OKX make strides in regulatory compliance and user protection.
