The value of Bitcoin recently dropped from $9,500 to $8,100 which made some leveraged and short-traded traders achieve successful trades, but they accused Binance of unfairly making trades happen.

Short deals are selling a currency you own, with the aim of buying it later at a lower value and thus making a profit as a result of the difference between buying and selling, and leverage can be introduced in it to double the profit, but it is very dangerous and causes the account to be zeroed in the event of a loss.

Wrote A dealer named “AthenaBank” tweeted on May 10, saying:

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Binance closed my trade after I made 7 cases of my funding.

what is going on? The place and the bargain bargain? Bitcoin dropped to $8000.

Who pays the difference?

However, closing the shorts was methodical, and the method is known as automatic speed removal.

Within the futures market, traders use debt or leverage to trade with a larger capital.

Binance, for example, allows a trader to benefit from 125x of their initial capital.

If a person has $1,000, they can trade up to $125,000.

There is a change and match search function in the trading platforms which is based on matching orders between buyers and sellers.

Example:

If trader “Omar” needs to sell bitcoin at $9,500, the change and match function is to search for trader “Mohammed” who wants to buy bitcoin at the same value.

So there is a problem when Bitcoin rises or falls suddenly, causing the value to fall and fluctuate rapidly, creating imbalances in the order book between sellers and buyers.

When there is a large discrepancy in the order book, this can potentially lead to a series of liquidations.

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This is what happened earlier on March 12 when Bitcoin fell to $3,600 on BitMEX.

Both Binance Futures and BitMEX use a system referred to as automatic debt removal to make sure the order book remains balanced.

When an insurance coverage fund is not sufficient to challenge liquidations, various deals are more likely to be liquidated.

An example of what we’re talking about:

Binance Futures explains it:

When the measure of the trader’s account decreases to zero, the insurance coverage fund is used to offset the losses.

However, in some exceptionally unstable market environments, an insurance coverage fund can be unable to handle losses, and open positions must be scaled back to compensate.

In such a case, the high leveraged trades are liable to reduce their trade size first.

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Sometimes traders using 75 to 125 times within the initial percentage are the first to lose their trades in abnormally unstable market conditions.

Can automatic debt cancellation cases be reduced?

Automatic heuristics and filtering happen more or less continuously within the cryptocurrency market as a result of the unstable performance of Bitcoin.

Therefore, it is difficult for trading platforms to impose stability and prevent automatic liquidation.

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