March 12th and 13th, 2020, will be remembered as days that brought the most significant stress test to the crypto-lending ecosystem and the whole financial market.

We tell you the story of the financial disaster that will be recorded in the history of crypto as the largest single-day drop. Read how the crypto-lending industry was on thin ice struggling to manage tons of margin calls at once and help thousands of users to avoid collateral liquidations.

The story from the inside of CoinLoan includes margin calls, sleepless nights, and delayed transactions. Despite temporal dysfunctions within the crypto market, the team has successfully coped with all challenges. Moreover, we’re happy we could help some users that have been caught off guard.

If you consider that much of our personal growth comes from the most painful events in our lives, we could even look at turbulent times as the most excellent learning opportunities.

12.03.2020 — Black Thursday

Chart showing the 12.03 daily move, from Coindesk
Chart showing the 12.03 daily move, from Coindesk

Starting From 8 AM (UTC +2), Bitcoin Prices Begin to Decline Gradually

CoinLoans’ internal system has notified the team that many loans start to fall into liquidation risk status (over ~80% LTV) one by one. Clients got first margin call notifications asking to add more collateral. Users had a few hours to react to those early notifications; the ones who strengthened their positions at that point significantly increased their chances when the market went into a tailspin.

12:30-12:50 (UTC +2), Bitcoin Crashes

At some point around noon, Bitcoin sharply dropped 21% from $7,356 to $5,796 in about twenty minutes. For the whole day, Bitcoin lost 31.5% of its value. It was its worst day in 7 years. Other cryptocurrencies fell greatly as well.

When the market value of collateral plunged, it brought the first wave of liquidations on CoinLoan. There were no totally sudden ones, as all clients got their margin calls that morning. Many loans have been saved. However, some investors didn't have time to react during the free fall.

To avoid liquidation, users deposited crypto to the platform to add more collateral. A massive amount of panic selling has overloaded the Ethereum network to a degree not seen in a year. The average cost of an ETH transaction has risen to $0.58, with confirmation taking up to 44 minutes.

Many exchanges experienced some form of infrastructure problems during the price crash. For users, this meant that a transaction either became very expensive or took a very long time to be written into the blockchain until prices correct even more. Users were wasting their precious time needed to protect loans from zeroing.

The alternative solution was to prepay the loan ahead. In particular, many CoinLoaners used our new feature to make repayments with collateral before it was devalued even more.

To make rapid deposits, some users transferred fiat to the platform via Visa/MasterCard and changed it into crypto directly on CoinLoan. Such a flow required only a minute while the Ethereum network could detain transactions for close to an hour.

It was a high-stress moment for the team. We received dozens of requests in support and did everything in our power to avert liquidations and avoid the platform breakdowns. For instance, we accelerated and accepted deposits manually before the network confirmed them during the “traffic jam.”

CoinLoan's infrastructure coped with its job. The platform never had a single case of failure during the 12th of March. Many loans have been liquidated due to rapid price changes, but the big part was saved thanks to the fast reaction of borrowers in cooperation with CoinLoan's support team.

Unfortunately, many crypto-companies have not escaped the technical issues.

  • Binance reported the bloodbath day
    - spot depth push experienced some delays, fixed
    - futures UI 500 errors for a few minutes, fixed
    - some futures ADL and margin calls, no cyclic crashes.
    Overall 5x system load than all previous peaks. Holding up so far, monitoring all systems.
  • Bithumb informed about delays
    Due to a temporary network issue, withdrawals and deposits of #ETH and #ERC20 tokens have been delayed for about two hours.
  • DeFi giant MakerDAO went underwater $4M
    According to a blog post by Maker, MakerDAO, one of the largest Ethereum's DeFi applications faced an emergency shutdown as its under-collateralized debt reached over $4 million.

Is This Time to Buy Bitcoin?

At about eight o'clock in the evening, the CoinLoan team kept communicating with customers, checking the numbers and functionality of the platform. The crisis was over.

The team finally got a chance to share impressions from the stress-test with colleagues and discuss if it’s a top dip-buying opportunity for bitcoin.

CEO of CoinLoan, Alex Faliushin, cautioned about the possibility of the second crash and asked us to keep focused. Time has shown that he was right.

13.03.2020 — Friday the 13th

Chart showing the 13.03 daily move, from Coindesk
Chart showing the 13.03 daily move, from Coindesk

1:00 (UTC +2), Bitcoin Crashes Again

Friday the 13th became the day when the whole of the cryptoverse slid into the red one more time. The bitcoin meltdown started after midnight going down from $5,800 to reach about $4,800 in forty minutes. Many of the users were sleeping and couldn’t react in time.

4:15 (UTC +2), Bitcoin's Price Briefly Sank to $3,950 Before Rebounding to Around $5,500

Bitcoin plunged to a 10-month low of about overnight — a more than 50 percent drop in the space of 48 hours. Ethereum dropped below $100. The CoinLoan team didn't get much sleep that night.

The number of liquidations on the platform hit its highest level at that moment. Survivors can be grouped into three categories:

  • Users who managed to add more and more collateral actively and continuously to maintain a healthy loan-to-value ratio;
  • Users who were so careful to put low LTV (about 50%) beforehand;
  • And also those who borrowed against the loan currency, for instance, BTC against BTC.

Two crypto platforms, BitMEX and Gemini, went down for about 45 minutes late on Thursday night.

  • BitMEX reported breakdown
    Around 4:16 - 4:40, the crypto exchange BitMEX fell victim to disruptions due to the hardware issue, according to its official release. Normal service resumed at 5:00 AM.
  • Emergency maintenance on Gemini
    Gemini had to perform emergency maintenance in the early hours of March 13th.

We thank our users for your understanding and trust in hard times. We’re glad we could help some CoinLoaners. The platform had successfully weathered the biggest stress-test in its history. No one loan left undercollateralized despite the precipitous fall and transfer delays.

Hard times teach us valuable lessons. Now we have ideas on how to make the platform even better, faster, and more convenient to be prepared for the next extraordinary market move.