1) I heard that about a week ago 90 million dollars worth of BCH/USD perpetual futures liquidity disappeared from Coinflex. don't have data on this, maybe somebody has it?

2) Coinflex has always communicated that flexusd is backed by 10% USDC and 90% by short and long positions (a hedge) that as far as I know are not with a counterparty but on their own exchange. Maybe Mark Lamb can correct me if I am wrong about this but this is how I understood it. These where longs and shorts on various coins. BTC, ETH, XRP, Monero, BCH, etc etc.

3) It has been communicated to me that a big whale with a really big BCH long position on the perpetual future BCH/USD market went below the value of his colletoral. He should have gotten liquidated by that has not happened yet. (Marc De Mesel? Mike Komaransky? Roger Ver?)

4) On all the other markets there are lots of buy orders around 115 USD per BCH but hardly any sell orders.

5) A whale that a couple of days ago still have 6 million flexUSD on smartBCH has been buying up the same amount of BCH that hop.cash offered as a bridge. If Hop.cash had a 500 BCH buffer this whale would buy 500 sBCH with his flexusd and use the bridge to exit to mainchain. If hop.cash had a 100 BCH buffer this whale would buy up 100 sBCH and use the bridge.

6) Because the Bitcoin.com wallet has dropped SLP support more and more people are importing their seeds in to EC and are trying to send their flexUSD slp to coinflex. Some will use coinflex to move it on to smartBCH but others might try to redeem it for USDC. That means the last couple of weeks redemption pressure most likely has been higher then before Bitcoin.com dropped slp support.

4 and 5 clearly shows me that some whales knew something was about to happen on Coinflex. 4 is whales that are waiting for BCH to get dumped by coinflex. 5 is a whale that knew about the issues and was trying to get as much BCH out as possible at any price.

So let's see if we can figure out the logic flow.

Somebody sends 1000 USDC to coinflex to mint for flexUSD.

Coinflex takes a 100 USDC and puts this appart.

Coinflex uses 900 USDC to to open two positions with.

Let's say the price of BCH is at 500.

They short 0.9 BCH by borrowing it on their own market and selling it for 450 USDC. One of their traders that bought it now holds 0.9 BCH and they hold 900 USDC. They owe a lender 0.9 BCH

They long 0.9 BCH by borrowing 450 USDC on their own market and buying 0.9 BCH with it. One of their traders that sold it now holds 450 USDC and coinflex holds 0.9 BCH and 450 USDC. They owe a a lender 450 USDC.

Now the price of BCH goes to a 100 dollars.

Coinflex now holds:

  • 100 USDC

  • 900 USDC from the short that can be used to buy 0.9 BCH with to close the short. They owe a lender 0.9 BCH. The cost price for this is 90 USDC. They now have 900 – 90 USDC = 810 USDC

  • 0.9 BCH + 450 USDC from the long that can be used to sell for 90 USDC to close the long. They owe a lender 450 USDC. The cost price for this is 450 USDC. They now have 90 USDC.

100+810+90 USDC = 1000 USDC.

Now what happens when they can not close a BCH short and long AT THE SAME PRICE?

Let's have the following scenario:

The order book for BCH has 10 orders in it. 8 and on the buy side (bids at the bottom in green) and two are on the sell side (asks at the top in red)

The 6 buy orders are:

1 BCH at 100

1 BCH at 90

1 BCH at 80

1 BCH at 70

1 BCH at 60

1 BCH at 50

The 2 sell orders are

sell 0.1 BCH at 101.

Sell 0.8 BCH at 200

On the buy side there is 450 USDC

On the sell side there is 0.9 BCH.

Now the person that gave a 1000 USDC to coinflex and has flexUSD wants to redeem his flexUSD for 1000 USDC.

Coinflex is now going to close their shorts and long.

First the longs, they have to sell 0.9 BCH at market price. They sell 0.9 BCH for 90 USDC. No problem there.

Now the short side, they have to buy 0.9 BCH at market prices. they can buy 0.1 for 101 and 0.8 for 200. This cost them 10.1+ 160 = 170.1

They are now missing 170.1-90 = 80.1 USDC.

They now only have 919.1 USDC to give back for a 1000 flexUSD.

But wait if coinflex borrowes 450 USDC and 0.9 BCH and also has 450 USDC and 0.9 BCH can't they just swap internally?

Okay but hold on. The yield on flexUSD comes from the interest that coinflex makes by borrowing OUT the USDC to their traders. So does that not mean that coinflex their OWN colletoral on maintaining these short and long positions is borrowed out to traders that want to trade with leverage?

And there was whale with a huge BCH leveraged long, so does that not mean that this whale borrowed tons and tons of that USDC at least internally?

So … for coinflex to close their own short and long positions that back flexUSD they first have to get the collateral for these positions back that they borrowed to a whale with a huge leveraged bch long.

Okay so what happens when you deposit BCH as collateral on coinflex and then loan against it and WITHDREW the USDC.

Well at the moment that the value of this withdrew USDC is the same as the BCH colletoral it should be sold on the market for USDC so that there are no losses.

And this is what has not happened. Coinflex for some reason had to dump a lot of BCH on the market and they did not. And now the value of this BCH is under the value of the withrew USDC.

That 90 million dollars worth of BCH/USD perpetual future liquidity at 115 USD per BCH is 782,608 BCH which kind of matches up with the BCH that was send to Binance recently.

On may 25 the BCH on Binance their hot wallet was 2000 BCH.

Then between may 25 and June second the balance went from 2000 to 73000 BCH.


But then lost of people have been buying BCH on Binance, sending it to hop.cash to sell for flexusd at 5 to 11% higher price…. then try to redeem the flexUSD for USDC, send the USDC to Binance and buy more BCH with it to go again.

Anyways it still looks like I am missing a lot here. What am I missing?

TLDR; Coinflex at one point most likely was forced to liquidate a bunch of BCH and other crypto that was used as collateral to get back UDSC so they could honor flexusd remptions but the low liquidity on the market makes it so there is a mismatch between them closing shorts and longs and the difference is the hole in coinflex solvency so they did not liquidate and now the market figured this out and is trying to take advantage and their hole is now even bigger, this would explain the mismatch between ask and bids on the big exchanges that trade BCH and why BCH is currently not going up and down with the rest of the market anymore but keeping in the 110 to 120 range.

submitted by /u/i_have_chosen_a_name
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