Andrew Thurman

As prices dipped lower across the sector on Thursday, derivatives traders were among the hardest-hit with $90 million in long positions wiped out in just two hours.&nbsp;



According to data from <a href="https://www.coinglass.com/LiquidationData">Coinglass</a>, between 10:00 am and 12:00 pm ET, a sector-wide price plunge led by bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) dropping from $28,393 to $27,920 kicked off a series of liquidations across centralized exchanges. 



The two-hour washout is just a fraction of the $200 million lost over the last 24 hours — the highest total since June 9, when $348 million in longs were liquidated.



Leading the liquidations for the day are OKX, which liquidated $69.2 million in longs, followed by Binance, which wiped $47.3 million.&nbsp;



A lack of volatility in crypto large-cap assets such as bitcoin and ether (<a href="https://blockworks.co/price/eth">ETH</a>) means that the liquidation stats could have been even worse. Bitcoin has been trading in a $1,500 range between $30,000 and $28,500 for the better part of a month, and a recent Kaiko report found that both BTC and ETH have recently been less <a href="https://www.kaiko.com/">volatile</a> than oil. Traditionally, derivatives traders prefer assets with high volatility.&nbsp;



On-chain leverage positions may be the next area of focus if prices continue to drop. Because of DeFi protocols’ liquidation procedures, unwinding on-chain derivatives and leverage positions can lead to liquidation cascades and protocols programmatically sell user collateral.&nbsp;



According to <a href="https://defillama.com/liquidations/eth?stackBy=protocols">DeFiLlama</a>, $162.3 million is at risk of liquidation within a 20% price drop on the Ethereum chain alone, and $1.6 billion at risk total.&nbsp;



Ether is down 4.7% on the day to $1,736.



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Steep price pullbacks wipe $90M in longs

Shalini Nagarajan

FTX was fine until it wasn’t, and fears around its insolvency have sent shockwaves across crypto, hitting users hard. 



The crypto exchange paused withdrawals after seeing funds worth <a href="https://www.reuters.com/business/finance/crypto-exchange-ftx-saw-6-bln-withdrawals-72-hours-ceo-message-staff-2022-11-08/" target="_blank" rel="noreferrer noopener">around</a> $6 billion leave its platform in the last 72 hours. 



US-based platform FTX.US — a separate firm not part of the acquisition offer — remains operational and facilitating withdrawals. But users of FTX&#8217;s flagship exchange headquartered in Antigua and Barbuda are locked out of their funds. 



Several have taken to Twitter to disclose their entire net worth is tied up on the embattled platform.



FTX began facing heat after Binance CEO Changpeng Zhao <a href="https://cms.blockworks.co/binance-is-buying-ftx-a-timeline-of-events/" target="_blank" rel="noreferrer noopener">smelt a rat</a> and said his exchange would liquidate its stash of FTT tokens, in what he initially urged was not an attack on a direct rival. 



Investor panic quickly grew around a Terra-style death spiral. At the time, the platform was <a href="https://cms.blockworks.co/binance-ceo-goes-full-fud-in-attempt-to-bury-ftx/" target="_blank" rel="noreferrer noopener">processing</a> around $2.6 billion in daily volume but has handled $4.3 billion in the past 24 hours, per <a href="https://messari.io/exchanges" target="_blank" rel="noreferrer noopener">Messari</a>, ranking it fourth behind its new prospective owner Binance, Coinbase and Uniswap.



On Tuesday, the exchange attempted to calm fears by <a href="https://twitter.com/FTX_Official/status/1589790870290993152">tweeting</a> its team was working to reduce a withdrawal backlog. “Queue is decreasing and getting back to more reasonable levels,” it said. There&#8217;s been no update since.



<h3 class="wp-block-heading">FTX users feeling more than financial pain</h3>



Prominent crypto investor <a href="https://twitter.com/cobie/status/1590188580483497985" target="_blank" rel="noreferrer noopener">Cobie</a> described the state of affairs as the worst-ever “exchange rug.” In the crypto world, a “rug” or “rug pull” refers to a crypto project that seems promising but deserts investors by taking off with their funds.



It might be a stretch to consider the FTX situation an exit scam in the classical sense (it&#8217;s more appropriate to say it buckled under a bank run). Still, it’s clear that Cobie, like many, didn’t expect FTX to fail its users. 



“Every exchange that rugged in the past felt kinda unsafe to use pre-rug,” he <a href="https://twitter.com/cobie/status/1590188580483497985" target="_blank" rel="noreferrer noopener">tweeted</a>. “I thought there was [probably] sub-1% chance of FTX insolvency.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">assuming FTX funds are gone this is biggest 1 day loss in cat&#39;s life, mebbe le saddest part is cat may no longer sponsor streamers, art software, open source projects, etc, cus dat costs cat ~ 1M a year money was always a number, cat still will live in nice hotels, is oke&mdash; CL (@CL207) <a href="https://twitter.com/CL207/status/1590209288404103169?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Bitcoin trader and self-described Solana maximalist <a href="https://twitter.com/AWice/status/1590273446935941120" target="_blank" rel="noreferrer noopener">Alex Wice</a> said his entire net worth is on FTX, while <a href="https://twitter.com/Pixelsenpai1/status/1590273687495680004" target="_blank" rel="noreferrer noopener">another user</a> claimed he lost more than half his own.



FTX founder Sam Bankman-Fried is one of the <a href="https://twitter.com/SBF_FTX/status/1347964322459262977" target="_blank" rel="noreferrer noopener">loudest</a> investors in Solana and its ecosystem, having backed <a href="https://www.coindesk.com/markets/2021/04/28/serum-token-becomes-latest-project-in-bankman-fried-empire-to-turn-heads/" target="_blank" rel="noreferrer noopener">multiple</a> projects built on the platform throughout the years.



Bitazu Capital founding partner <a href="https://twitter.com/singhsoro/status/1590281496065363969" target="_blank" rel="noreferrer noopener">Mohit Sorout</a> indicated 95% of his funds were stuck on the trading platform. Early crypto investor <a href="https://twitter.com/lukebelmar/status/1590135228646858754" target="_blank" rel="noreferrer noopener">Luke Belmar</a> said he lost $120,000.



Others said they were not just hurt financially, but also <a href="https://twitter.com/DarknessDooma/status/1590294633007173633" target="_blank" rel="noreferrer noopener">emotionally</a> since they spent a considerable amount of time learning how to trade and utilizing bots, the fruits of which are currently in limbo.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Had entire net worth on FTX, oops. Will do a FTX victim party live from Tokyo as a Twitter Space, about 29 hours from now. See you there. 🫡&mdash; Alex Wice (@AWice) <a href="https://twitter.com/AWice/status/1590273446935941120?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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DeFi influencer <a href="https://twitter.com/DegenSpartan/status/1590231725044793345" target="_blank" rel="noreferrer noopener">@DegenSpartan</a> said he managed to withdraw a significant amount, but “foolishly” left some as he thought the situation wasn’t too bad.



“[In my opinion,] Binance backs out, FTX shuts down, goes into bankruptcy and we see a fraction of our money in a few years,” he tweeted.



Blockworks hasn’t independently verified whether the users’ claims are true. But <a href="https://twitter.com/pepecasso1/status/1590231920147042304" target="_blank" rel="noreferrer noopener">Twitter</a> is <a href="https://twitter.com/CryptoChihiro/status/1590188482575896576" target="_blank" rel="noreferrer noopener">littered</a> with <a href="https://twitter.com/RunnerXBT/status/1590251416316436480" target="_blank" rel="noreferrer noopener">reports</a> from <a href="https://twitter.com/Tree_of_Alpha/status/1590273382712750080" target="_blank" rel="noreferrer noopener">users</a> <a href="https://twitter.com/LeCryptographe/status/1590265347739115523" target="_blank" rel="noreferrer noopener">disclosing</a> large chunks of their net worths stuck on FTX.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">GM Crypto, I just lost a lot of money to FTX. If anyone else has been effected you&#39;re not alone, and its OK. This is the third time I&#39;ve lost money to an exchange so, once bitten, twice shy, the third time is a bit of a joke. lol! :p&mdash; mfer#6269 (@CryptoRat6) <a href="https://twitter.com/CryptoRat6/status/1590260840917528577?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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A spokesperson for FTX didn’t return Blockworks’ request for comment by press time.



Alexander Tkachenko, CEO of asset tokenisation platform VNX, weighed in on the matter, noting that FTX was objectively known as one of the best exchanges in the space.



“FTX appears to have been the source of liquidity for the various speculative transactions of the founders, which led to this situation. The sale of FTX and fulfilling its obligations to the users is the best option,&#8221; Tkachenko told Blockworks.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">So I’ve likely lost a healthy 6 figures on FTX. Many others in the same boat, some more, some less. It’s all relative though. Life will go on, speak with your loved ones and prioritize your mental wellbeing if you’ve been caught up in this shitshow. Don’t do anything stupid.&mdash; tedtalksmacro (@tedtalksmacro) <a href="https://twitter.com/tedtalksmacro/status/1590213247889997824?ref_src=twsrc%5Etfw">November 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It would be very damaging to the crypto industry if the Binance deal doesn&#8217;t go through, leading to users losing their assets, he added. &#8220;Zhao appears to understand this and is acting as the ‘lender of last resort.'&#8221;



Chris Bradbury, CEO of DeFi platform Oasis.app, said he wouldn’t describe FTX’s near-collapse as a “rug pull,” but that it did play with fire and get burnt. The value of user deposits still on FTX is currently unclear.



“If the Binance deal goes through, it looks like that will protect users who have funds on the platform and will be able to get their money out, however it&#8217;s still a big if regarding the deal going through by the looks of things,” Bradbury said.



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