RATE Group | Traders Say Binance Cut Their Bitcoin Shorts: Here’s Why It Happened
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Traders Say Binance Cut Their Bitcoin Shorts: Here’s Why It Happened

10 May Traders Say Binance Cut Their Bitcoin Shorts: Here’s Why It Happened

Posted at 13:59h in Bitcoin News by

As the Bitcoin (BTC) price abruptly dropped from $9,500 to $8,100, some traders on Binance claimed that their winning short trades were unfairly cut short. 

A trader named AthenaBank wrote on May 10:

Deleverage? Binance close my short after I make 7 times my investment. What’s going on? Where is my short? The BTC dropped to $8,000. Who pays the difference?

But, the closure of the shorts was systematic and the process is called auto-deleveraging.

What is auto-deleveraging and how can winning Bitcoin trades get cut short?

In the futures market, traders use debt or leverage to trade with larger capital. Binance, as an example, allows a trader to use 125x of their initial capital. If a user has $1,000, the user can trade with up to $125,000.

The role of a cryptocurrency exchange is to match orders between buyers and sellers. Hence, if trader A wants to short Bitcoin at $9,500, the role of the exchange is to find trader B that wants to buy BTC at the same price.

A problem occurs when the…

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