Traders holding the heavily leveraged BULL tokens saw massive losses when Binance failed to update the token’s price for more than three hours. Dozens of traders called on Binance and FTX, the exchange that issued the tokens, to reimburse them for their losses.Leveraged Tokens Take a Hit
The crypto market took a heavy hit last week, experiencing one of the biggest sell-offs in its history. Cryptocurrency experienced over a $50 billion wipe out in market capitalization, leading many to believe that the industry was set for an unprecedented bear market.
While most lost money on the rapidly deteriorating prices of cryptocurrencies, a significant number of traders fell victim to network problems.
The ones that incurred the most losses were traders holding the heavily leveraged tokens issued by FTX exchange. The exchange’s leveraged tokens are ERC-20 tokens that represent a 3x leveraged crypto position—for example, EOSBULL is a +3x leveraged EOS token.
It’s on the back of these leveraged contracts that the exchange saw a massive rise in popularity this year, becoming the fifth largest crypto trading platform by volume last month.
Sam Bankman-Fried, the CEO of FTX, told CryptoBriefing last week that the fact that traders can move their ERC-20 leveraged positions around the blockchain and trade them on other exchanges is what made them popular in the first place.
However, as promising as these tokens can be, they are much more sensitive to price movements and are considered extremely risky. That’s why last week’s huge flash dump managed to wreak havoc among traders holding and buying FTX’s leveraged tokens, with those owning EOSBULL tokens experiencing the biggest losses.
Namely, the price of EOSBULL and ETHBULL tokens on Binance decreased drastically more than the price of their underlying coins, causing a slew of liquidations. Traders complained that the price of the EOSBULL token lost half of its value in a sing...