OKX’s native exchange token, OKB, experienced a significant drop of over 50% in just three minutes on Tuesday. This sudden decline was triggered by a series of liquidations caused by an abnormal price fluctuation. However, OKB managed to recover from its low point of $25.17 to $45.64.
According to CoinMarketCap, the 24-hour trading volume of OKB increased by a staggering 2,100% to reach $79 million. This surge in trading activity indicates that investors quickly took advantage of the lower prices to buy OKB tokens.
In response to the flash crash and subsequent liquidation cascade, OKX, the cryptocurrency exchange behind OKB, announced that it would compensate users for any losses incurred during this event. The compensation plan, which will cover losses from abnormal liquidation, pledge lending, margin trading, and cross-currency transactions, will be disclosed within 72 hours. Additionally, OKX stated that it would enhance its spot leverage gradient levels, pledged lending risk control rules, and liquidation mechanisms to prevent similar issues in the future.
Flash crashes are not uncommon in the cryptocurrency market, as thin liquidity is often spread across multiple platforms. For OKB, a sell order exceeding $224,000 could potentially trigger another price cascade due to the limited market depth. Despite this vulnerability, OKB remains a significant player in the crypto market, with a market capitalization of $2.8 billion. This makes it the fourth-largest exchange token in circulation, according to CoinGecko.
The flash crash of OKB serves as a reminder of the inherent volatility and risks associated with the cryptocurrency market. Investors and traders must remain vigilant and exercise caution when participating in such markets.