Detailed explanation of the YFII1D5L, YFII1D5S, and YFII1D3S events

1. Detailed explanation of the event

2022.05.25 04:22 AM (UTC) YFII flash crash occurred. As of 2022.05.25 04:44 AM (UTC), YFII fell from 1210.1 to 341.1 range of price drop was 71.8%.

During the corresponding period, our ETF products change as follows:
The net value of YFII5L products fell from 0.29117 to 0.0008
The net value of YFII5S products rose from 0.18741 to 14.51395

In the face of an extreme market, although our ETF can have a strong rolling ability, there will be a huge risk of the unilateral wrong direction.

2. Market-making process response

YFII5X Products

At 04:45 AM (UTC), as the net value of YFII5L fell below 0.01 and reached the emergency merge condition, the net value of YFII currency was merged. The duration was 3 minutes.

During the 04:45-04:48 AM (UTC) period, YFII prices rose from 325.2 to 404.6, up 24.2%. For YFII1D5S which was in the situation of emergency merge, it was impossible to lighten up, stop losses and restore the balance. This resulted in the YFII1D5S prices falling to a such low value.

Due to YFII1D5L and YFII1D5S, the net values were 0.00118 and 0.0008 at 04:49 AM (UTC), respectively. All orders on the order book were traded in a very short time. Since 05:00 AM (UTC), orders on the order book lacked the correct net anchor, but because users began to buy and sell, the value gradually deviated from the net value.

YFII3X Products

The abnormality of YFII3S occurred from 09:00 AM to 12:20 PM (UTC) on 2022.05.25. During market fluctuations of the YFII2S product, users were actively buying and selling, which resulted in all our market-making tokens being bought in a short time. We failed to anchor the price of the currency near the net value in time. This abnormality was recovered on 2022.05.25, 12:21 PM (UTC). In view of the bad experience given to users, we also decided to compensate for all YFII3S losses during the period of problems.

Hotbit Team

May 27th, 2022