The Bitcoin Cash hard fork coming later today might lead to unstable prices and in response, major crypto exchange, OKEx suddenly closed its Bitcoin Cash (BCH) futures market before their respective expiration dates and delivered ahead of time to its customers.
The major digital assets exchange, operating out of Malta had broadcasted the premature BCH futures delivery on Wednesday, explaining that trading for its BCH1116 (weekly), BCH1123 (bi-weekly), and BCH1228 (quarterly) futures products had been halted at 9:05 am CET and executed contract delivery at 10:00 am CET. The deliveries were made notwithstanding the dates they were supposed to be terminated.
Bitcoin Cash Oncoming Hard Fork
The early deliveries have been attributed to the strong volatility and probable instability in prices not unrelated to the oncoming Bitcoin Cash hard fork which those in the crypto world are finding severely controversial. The fork will be activated on November 15, and existing Bitcoin Cash holders will hold funds on both chains. Worthy of note is the fact that Bitcoin Cash is a fork of Bitcoin, activated on 1st of August, 2017. The oncoming fork also rocked Bitcoin prices then in anticipation of the first ever fork for Bitcoin. In retrospect, anyone who owned Bitcoin also held an equal amount of Bitcoin Cash. So basically, the Bitcoin fork is now having its own fork.
The ‘main’ version has been developed by Bitcoin ABC (BCHABC), while a large number of miners are backing Bitcoin SV (BCHSV), the version developed by the self-acclaimed Satoshi Nakamoto, Craig S. Wright’s affiliated firm, nChain and supported by billionaire Calvin Ayre, a gambling and Bitcoin multi-millionaire.
It is expected that on the majority of platforms, BCHABC will retain the BCH ticker after the activation of the fork. There is a good possibility that at first, BCHABC will trade at a significant discount to the pre-fork value of bitcoin cash. Futures market operators such as OKEx and its traders would then encounter serious problems. OKEx stated that;
“Due to the upcoming hard fork, strong volatility is observed in the BCH spot and futures markets. OKEx expects an even greater volatility during the hard fork that may cause large-scale impacts, such as cascade liquidation. The final outcome of the BCH hard fork is still unpredictable, and so are the responses of other constituent exchanges to the new forked coins.”
Early Delivery on Futures Contracts
OKEx, in a seemingly wise act, decided not to alert traders to the early deliveries of contracts. This move was made to counter any potential form of market manipulation by traders. They further enumerated that the hard fork is a special case, and potential market manipulation would lead to a significant loss to its users. The closing of contracts was then done on short notice so the stability of the market would be ensured.
It has been rumored that OKEx met the instability surrounding the Bitcoin Cash fork with surprise. If they had anticipated the instability, they could have structured the BCH contracts to expire ahead of the fork. In the crypto world, traders are filled with uncertainty concerning the result of the fork, as recorded by pre-fork futures markets. While BCHABC had initially traded at a several hundred dollar premium to BCHSV, the gap had narrowed to just $43 at the 14th of November, with BCHABC priced at $263 and BCHSV at $220.