TradeXYZ to reimburse traders after SK Hynix crash triggers $57M liquidations

TradeXYZ announced it would reimburse traders for their liquidations on trading the SK Hynix (SKHX) semiconductor stock. The decentralized market caused liquidations after SK Hynix had a dramatic pre-market move. 

The South Korean semiconductor stock SK Hynix (Nasdaq:SKHY) is among the most actively traded perpetual futures contracts on TradeXYZ. For now, the main KOSPI index is still unavailable, but on-chain traders were quick to take up SK Hynix for its potential strong directional moves. The stock also reflected the general mood around the semiconductor stock narrative. 

As the South Korean market entered another correction, HIP-3 is one of the venues where traders can bet on the slide and immediately short SK Hynix. 

The SKHX market has now achieved over $20.9B in cumulative volume on TradeXYZ. This caused a disproportionate impact, once the index moved rapidly and caused liquidations for long positions. 

On HIP-3, SKHX was the second most active perpetual futures contract as of July 29. The contract reached $493M in open interest, with $589M in volumes for the past 24 hours. The past day was among the most active for trading SKHX in July.

The Lighter perpetual futures exchange also showed an anomalously low price, down to $839, but has removed the wick, and the market shows a ‘delisted’ status.

Why TradeXYZ saw a wave of liquidations?

TradeXYZ explained that SK Hynix dropped from $1,127.9 to $917.25 during Asian trading hours. TradeXYZ uses oracles to access external pricing, and in this case, the oracle was live. According to the deployer, the oracle system worked as intended in this case, and the liquidations were not due to any other errors on the side of the exchange. 

The exchange has promised to cover the losses linked to the price anomaly, and will reveal the eligibility criteria in the coming days. 

On the side of the South Korean NXT exchange, SKHX printed an anomalous price 29% below its prior close. The price was indeed corrupted, but was accepted by the TradeXYZ oracles. The price of perpetual futures on HIP-3 dropped by 17.9% within minutes, liquidating around $57M in long positions for 960 trader accounts. 

The price anomaly was due to a single order at 8.00 local South Korean time, when one share sale executed at the daily lower limit. At the opening, the thin buy orders meant this one-share sale determined the first reference price, which was then spread to oracles for decentralized trading.

The TradeXYZ liquidity absorbed around 11 percentage points during the price swing, but this could not save all leveraged long positions. 

Whales are back to shorting SKHX

The main attraction of SKHX is the potential for strong directional moves, and the possibility to short the stock as the semiconductor narrative slows down. 

SKHX attracted 108 whale positions, standing as one of the top equities selections on HIP-3. Of those positions, 48 are long on SKHX. The largest position is valued at $47.35M, reaching over $10M in unrealized gains. 

The same whale also shorts Nvidia (Nasdaq:NVDA), reflecting the overall attitude to the semiconductor trade.