Margin Lenders Lose $13.5 Million on Poloniex Due to a Flash Crash

Poloniex, a U.S. based cryptocurrency exchange announced on June 6, 2019, that Margin lenders on its platform had lost $13.5 million due to a flash crash in the CLAM market. In a bid to curb these losses, borrowers’ accounts which defaulted have been frozen until their loans are repaid to lenders.


Poloniex Loss Due to Price Crash in CLAM Market

Per the report, a price crash occurred on May 26, 2019, in the CLAM market which led to the loss of 1,800 Bitcoins valued at $13.5 million. Lenders on the cryptocurrency exchange which were affected amounted to 0.4%. As a result of the loss, there has been a 16.202% reduction in the principal of all active BTC loans.

According to Poloniex, borrowers’ account which defaulted have been frozen and will remain so until their owners have repaid the BTC which they owe their lenders and also comply with the cryptocurrency exchange’s terms of service. It further outlined that it is exploring more ways in which can help in settling the losses incurred by margin lenders.


Why Losses Occurred in Poloniex’s Lending Pool

While throwing more light on why losses occurred in its lending pool, the exchange stated that the speed at which the crash took place and the lack of liquidity in the CLAM market prevented automatic liquidations of CLAM margin positions to process. It also said: “a significant amount of the total loan value was collateralized in CLAM, so both the borrowers’ positions and their collateral lost most of their value simultaneously.”


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