Altcoin News: Marginal Lenders of the Poloniex Exchange Lost 1,800 BTC Due to a Drop in the CLAM Rate

June 7, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

Marginal lenders of the American crypto exchange Poloniex lost about $13.5 million due to a sharp drop in the rate of cryptocurrency CLAM.

Poloniex announced the incident on its blog on Medium, noted that a serious price crisis on the cryptocurrency market on May 26, CLAM led to losses on margin loans, which were approximately 1,800 BTC or $13.5 million at the time. The incident affected 0.4% of all users and led to a reduction of all active loans in BTC by 16.202%.

Marginal lenders — users of the exchange, providing a loan in Fiat or liquid cryptocurrency to other traders for marginal transactions (trade “with leverage” ). Under normal conditions, margin positions are automatically liquidated if the borrower’s losses exceed the free balance of his own funds.

Subsequently, the exchange froze all accounts of insolvent borrowers and will keep them frozen until the borrowers repay their loans. Poloniex also claims that it will return the funds to the affected creditors as soon as it recovers the lost money. Poloniex suggested that the incident occurred for a number of reasons, and explained:

“ First, the velocity of the crash and the lack of liquidity in the CLAM market made it impossible for all of the automatic liquidations of CLAM margin positions to process as they normally would in a liquid market. In addition, 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. As a result, some borrowers were unable to repay their loans with the digital assets they held on Poloniex.”

Last month, Poloniex stopped trading nine cryptocurrencies due to regulatory uncertainty, and in December, the exchange launched trading services for institutional clients.

Author: Marko Vidrih