Dear respected users,
Considering the fact that the surge of SWRV’s spot trading price in June 26th, 2022 has led to the drastic increase of SWRV1D5L’s price and multiple urgent merges of SWRV1D5S, the timeline of the incident is listed as follows:
Starting from 16:00, June 26th, 2022 (UTC), the pegged price of our normal 5L product’s rebalance price was initially 0.149, with the normal 5S product’s rebalance price being 0.154, the net value of SWRV1D5L was 23.825, and the net value of SWRV1D5S was 0.0955.
By 16:50, June 26th, 2022 (UTC), the price of the underlying asset reached as high as 0.166, with a range of increase of 11.4% in the price of the underlying asset, the net value of SWRV1D5L was 32.483, and the net value of SWRV1D5S was 0.04792. Due to the rebalance occurred during the period mentioned above, the range of increase of 5L product was 36.35%, and the range of decrease of 5S product was 49.82%, the net value of 5S product was lower than 0.04792. Hence, according to our normal procedures, we decided to conduct urgent merge on relevant product.
By 18:56, June 26th, 2022 (UTC), we had already conducted 3 merges on the product, and the price of SWRV had increased from 0.145 to 1.0550, with a range of increase of 627.58%. Meanwhile, the net value of 5L product had also increased from 23.825 to 597.866, and the net value of 5S product had declined from 0.48705 to 0.00016 since its previous merge. Considering the fact that the decimal places of order placement system on Hotbit is restricted to 4 decimal places only and that the precision of our price was already rounded to 5 decimal places, in order to maintain normal market making process and reduce the spread, we had decided to urgently merge the product for 3 times, and theoretically, the merges would pull up the net value of the 5S product back to 0.16.
However, due to the huge fluctuations of the market, by 18:57, June 26th, 2022 (UTC), the price of SWRV had accumulated a range of increase of 18.49%. The sudden fluctuations under the 5 times short leverage had led to the fact that the price of the 5S product declined from 0.16 to 0.01275.
By 19:19, June 26th, 2022 (UTC), the price of SWRV had increased by 25.45% within one minute. If at this time, the users only chose to purchase the normal 5 times leveraged assets, a forced liquidation would be conducted to their accounts. However, due to the special mechanism of our leveraged ETF products, we will reduce the positions for our users during this period. Correspondingly, the net value of our 5S product was declined to 0.00002, and the net value of our 5L asset reached 1749.31.
By 19:35, we had conducted 4 urgent merges on SWRV1D5S, and the price of the product had increased again from 0.0009 to 1.04 (theoretically the price was 0.9, but the price of SWRV was declining by that time, and the price of the 5S product was increasing correspondingly).
Please refer to the K-Chart of SWRV1D5L during its price surge as below, the net value of the product has once reached 1866.4
Please refer to the K-Chart of SWRV1D5S as below, you may check the records of merges by clicking “Merge History” at the upper right corner of the web page.
The market trends of relevant short and long products of SWRV during the surge of SWRV price are concluded as above. Apparently, all 8 merges of SWRV1D5S occurred during the surge of SWRV price. In order to maintain the normal market-making process of ETF products and lower the trading cost for our users, the price of SWRV1D5L has accumulated a range of increase of 22.1% during this period, with the maximum price surged to 1866.4 and the maximum range of increase reaching 8445%. Obviously, any single-sided market trends may bring tremendous benefits for ETF products. However, if any users choose the wrong direction, they will also face losses in their assets when extreme market condition occurs.
Nevertheless, during the price surge of SWRV, the maximum loss occurred to SWRV1D5S was still lower than 100% of the user’s capital, but on the other hand, the profit of SWRV1D5L may reach 8445% of the user’s capital, which showcases that one of the most distinctive features of ETF products is to undertake limited risks with limited costs, and meanwhile seek for maximize its incomes.
Finally, what we would like to remind all users again is that both the mechanisms of rebalance and merge in our ETF products may cast certain influence on users’ trading activities, we hope that all our users can read our relevant descriptions carefully before conducting any relevant trading activities. We hope that all our users may gain tremendous incomes and enjoy excellent trading experience in Hotbit’s ETF section, and we will also continue to strive forward to provide only the best services for all our users.
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