After CoinFlex hit the headlines with “Bitcoin Jesus” Roger Ver failing to pay $47 million in margin calls over the dispute over Ver, Wu Blockchain provided more details about the collapse in its latest blog post. disclosed.
The beleaguered exchange did not liquidate Roger Ver’s position in time, Wu noted – an indicator of its poor risk management that contributed to the collapse of its entire ecosystem, with both digital tokens FLEX and FlexUSD crashing.
The Making of a Death Spiral
According to a source acquired by Woo Blockchain, CoinFlex reportedly entered into an agreement with Roger Ver before the market collapse, allowing high-net-worth clients to use their “personal credentials” as a guarantee. Permission was granted that his account would not be terminated immediately. However, it fell below the maintenance margin. Instead, Ver will have more time to meet the relevant margin requirements.
Ver starting from a long position on CoinFLEX with margin of BCH in the trade lost $47M, which then sat at $400. However, when the market went south sharply over the past months, resulting in a liquidity crisis on the exchange, the price of BCH fell to around $120. This meant that Ver’s position was well below the maintenance margin.
Sensing a drop in the price of its native token flex free, the exchange decided to use its stablecoin FlexUSD to buy large amounts of flex from the secondary market to boost its prices to hedge a short position on the spot price. decided to open. Nevertheless, the one who lent all Flex Tokens to sell to the exchange came from Roger Ver.
Wu’s post states:
“This means that if Roger Ver defaults on his margin, the Coinflex position will not be profitable and will then amount to a net long position in Flex Spot. The total corpus of funds started falling in a cyclical manner.”
In this circumstance, flexUSD price trading at below $0.30 today is in a death spiral.
intense struggle
Noting that Ver provided CoinFLEX with the liquidity to short its tokens, in that circumstance, Roger Ver wanted to be the exchange’s counterparty, according to Wu’s estimates, nearly half of CoinFLEX’s total loss of $120 million. Was responsible for $90M. This includes losses from the D-pegg of the stablecoin and the collapse of the SmartBCH cross-chain bridge.
Wu’s source also revealed that the BCH proponent accepted the default margin payment, but “enough cash to consider using shares (of companies such as Blockchain.com or Kraken) as collateral in exchange for margins.” There was no flow.” Later, Coinflex CEO Mark Lamb took the matter online while the two parties were negotiating, accusing Bitcoin Jesus of defaulting on a $47M loan.
The root cause of this debacle stems not only from Roger Ver’s default, but also from CoinFlex’s poor risk management, Wu concluded, at the expense of users on CoinFlex and SmartBCH. Regarding the exchange’s potential, Wu said, it could “gradually make up the shortfall with revenue from trading fees alone” due to its profitability, even though Roger Ver is unable to repay its debt, Wu said. .
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