800 Billion Won Lost on a Single SK hynix Share? Virtual Asset Forced Liquidation Incident

Price Linkage System of Perpetual Futures Distributor
Indexes Reflected Without Verification
Issues in NXT Pre-Market Call Auction as Well

In the domestic alternative trading system NextTrade (NXT) pre-market, a single share of SK hynix was executed at the lower price limit, which triggered forced liquidation of long (buy) positions worth hundreds of billions of won in the virtual asset derivatives market. This incident is considered a "man-made" error, stemming from a combination of a price data linkage system (oracle) by the distributor that failed to filter out erroneous prices, and an incomplete execution system at NextTrade.

At 8 a.m. on the 28th, as soon as the NXT pre-market opened, a single SK hynix share was executed at 1,272,000 won, down 29.99% from the previous day's closing price. As new buy orders came in, the share price quickly recovered to the 1.7 million won range. The problem was that Trade.xyz, the distributor operating the perpetual future product linked to SK hynix stock on the decentralized virtual asset exchange Hyperliquid, was referencing the NXT execution price in real time. The distributor converts the domestic won-based share price using the won-to-dollar exchange rate. The distributor’s oracle recognized the single NXT trade at 1,270,000 won as the effective Korean market price, applied the exchange rate, and the futures index briefly plunged from 1,127.9 dollars to 917 dollars, a drop of 17.9%. During this process, long positions worth $57.4 million (about 82.7 billion won) were forcibly liquidated within two minutes.

According to blockchain data firm Allium, it is estimated that more than 900 users suffered realized losses totaling $17.4 million. The distributor stated that, although the system functioned as designed, they would compensate users for liquidation losses incurred due to this abnormal price event. They also added, "We will further improve the oracle to respond to such extreme tail events in the future."

Industry observers assessed that the incident resulted from the combination of the distributor's oracle and the unique structure of the NextTrade pre-market. First, the distributor’s oracle reflected the illiquid pre-market price into the index without verifying trading volume or transaction value. While there was a mechanism allowing the price to slip by only up to 1% from the previous price each time it changed (to prevent liquidation), the problem was in the oracle’s design, which updated prices at a very rapid 3-second interval. When the price hit the lower limit in the spot market, the 1% downward move occurred in sequence every 3 seconds. Although the entire range of the spot market's lower limit was not tracked, the repeated 3-second declines accumulated, leading the futures price to fall by 17.9% and triggering forced liquidation.

Sungje Park, a researcher at Shinhan Investment & Securities, said, "Current price limits are a mechanism to slow down the speed of shocks, but they are not a system to filter out erroneous prices themselves." He added, "To determine if a single execution is the true market price, you should check not only the price but also the trading volume, trade value, and order book depth. Rather than applying an oracle structure designed for virtual assets directly to stocks, it would be better to design it separately, reflecting trading hours and market structure." He also suggested applying minimum order quantity and trade value conditions and setting the cap on the reflection of pre-market prices lower than that of the main session by considering differences in liquidity across trading times.

The trading method of the NXT pre-market is also seen as having contributed to this incident. In the main trading session, high trading volume and volatility mitigation mechanisms prevent such abnormal trades ("fat finger" errors) from being directly reflected in the price index. By contrast, in the NXT pre-market, call auctions commence immediately upon opening. When liquidity is insufficient, a single market order can be executed near the price limit even if it is for just one share. NXT is preparing to introduce a volatility mitigation mechanism (static VI) starting this September. If the price fluctuates by more than 10% from the previous day's closing or the reference price, trading will switch to a call auction for two minutes. After this system is implemented, if the tentative execution price at market open deviates significantly from the reference price, trading will be suspended, and orders will be collected to compute a new equilibrium price. Researcher Park commented, "These measures can reduce the possibility of a single share being executed at the lower price limit."

This content was produced with the assistance of AI translation services.