Chip-Stock Perps See $51.6m Liquidated in 10 Minutes

About $51.6 million of bets on chip stocks and semiconductor funds were forcibly closed in ten minutes on Saturday night, while US stock markets were shut. The bets were made with perpetual futures, crypto-style contracts that track share prices and trade around the clock. Most of the money came from traders betting that prices would rise. This is not investment advice.

What happened

“About $51.6 million in positions tied to chip stocks and semiconductor funds were force-closed between 21:22 and 21:32 UTC, according to CoinGlass data, and about $38 million of that came from traders betting on higher prices,” CoinDesk reported on Sunday. In UK time, that is 22:22 to 22:32 on Saturday 17 October. CoinGlass is a crypto data service that tracks liquidations across exchanges. TSN has not checked its figures directly.

According to CoinDesk, the contract tracking SOXL, “a fund that triples the daily moves in chip shares, took the biggest hit at about $12.7 million”. Contracts tracking SanDisk and SK Hynix “followed at about $10.8 million each”.

The figure is the size of the positions that were closed, not necessarily what traders lost. When a position is liquidated, the trader typically loses some or all of the deposit put up against it.

How it started

CoinDesk’s account of the sequence comes from David Jeong, chief executive of the trading firm Tread.fi, who reviewed the trades. It is his own account, and he was one of the traders involved.

“The selling started on Binance,” CoinDesk reported, according to Jeong, “who placed the first large SanDisk and Micron sell orders on Binance at 21:21:59 UTC” (22:21:59 UK time). CoinDesk did not report why he sold.

“Less than a second later, orders hit Hyperliquid, a crypto exchange where Trade XYZ lists stock-tracking contracts, and roughly 10 addresses opened bets against six chip-linked contracts within 1.8 seconds,” CoinDesk reported.

Binance saw far more early SanDisk trading than Trade XYZ. It “handled about $21.9 million of SanDisk trading in that first minute, against $3.1 million on Trade XYZ”, according to CoinDesk.

Binance, Hyperliquid and Trade XYZ had not commented in CoinDesk’s report, and TSN has seen no statements from them.

What are perpetual futures on stocks?

A perpetual future, or “perp”, is a contract that tracks the price of something without the trader owning it. Unlike a normal futures contract, it has no expiry date.

CoinDesk describes them as “contracts that track a stock’s price and trade around the clock on crypto exchanges, so traders can buy and sell chip stocks on a Saturday night”.

Most perp traders use leverage, which means borrowing to make a bigger bet than their deposit would allow on its own. That magnifies gains and losses. “A trader who borrows to make a bigger bet gets closed out automatically when losses eat through their deposit, and the forced selling can push prices lower for the next trader in line,” CoinDesk explained.

On Trade XYZ, the contracts are “margined and settled in USDC”, a dollar stablecoin, according to the platform’s documentation.

Why a weekend matters

During the week, a stock perp can follow the real share price on the stock exchange. On a Saturday night, the New York exchanges are closed, so there is no live share price to follow.

“With the stock market shut, there was no real share price for these contracts to follow, so traders were reacting only to each other,” CoinDesk reported. “Trade XYZ’s rules let trading on the platform set its own reference prices until outside stock quotes come back.”

Trade XYZ’s documentation on oracle prices sets this out. When outside prices are unavailable, its reference price “advances via a continuous-time exponentially weighted moving average”, a smoothed average that gradually follows trading on the platform. The documentation says: “When external data becomes unavailable, the internal mechanism initializes from the last available external price. When external inputs resume, the oracle reverts to the externally derived price on the next tick.” In plain English, it starts from Friday’s closing price, drifts with weekend trading, then snaps back to the real market price once trading resumes.

That matters for liquidations. Trade XYZ says its mark price, which is partly based on that reference, is “used for margining, liquidations, stop/limit triggers, and unrealized P&L”. It also limits weekend moves with what it calls discovery bounds, which “restrict the mark price within ±(1/max leverage) of a reference price”. The higher the leverage allowed, the narrower that band. The company describes its platform as “the primary venue for price discovery over weekends, holidays, and other extended sessions”.

TSN has not seen equivalent public detail on how Binance prices its stock-linked contracts when markets are closed.

The backdrop

“Memory-chip shares were already coming off a rough week as investors weighed new competition from Chinese chipmaker CXMT,” CoinDesk reported. TSN covered that sell-off, in which SK Hynix and Samsung shares fell sharply after CXMT claimed a denser DRAM design.

Round-the-clock trading of stock-linked products on crypto platforms is a growing area. TSN has reported on Binance’s bStocks passing $1 billion in assets, OKX’s tokenised stocks and Ripple Prime’s 24/7 perpetual swaps on real-world assets.

What to watch

US stock quotes return when markets open on Monday. CoinDesk says that will show “how far Saturday’s prices strayed from where the shares actually trade”. TSN is not predicting where the shares will open.

Still unknown:

Why the selling began. CoinDesk did not report a trigger, and Jeong’s reasons for selling were not given.
Who was liquidated. CoinDesk did not identify the traders whose positions were closed.
The exchanges’ view. Binance, Hyperliquid and Trade XYZ have not commented publicly that TSN has seen.

The Bottom Line

About $51.6 million of leveraged chip-stock bets were wiped out in ten minutes on a Saturday night, according to CoinGlass data reported by CoinDesk. With no live share price to follow, the contracts moved only on trading between crypto-exchange users. Monday’s open will show how far weekend prices strayed. This is not investment advice.