Crypto Crash Causes Adaptive Capital Collapse

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The recent crypto crash has cost plenty of people in the crypto world dear, not least those who were using BitMEX when it crashed during Bitcoin’s huge drop to $3,850 over a week ago. Another casualty was crypto hedge fund Adaptive Capital, who have been forced to shutter services and return what was left to investors after “infrastructural inefficiencies” caused it to take a massive loss during the crash.

Crypto Trading Too Risky For Adaptive

According to The Block, Adaptive released a letter to investors in which they admitted that they “took a big hit” during the episode and have decided to shut down the operation, stating that “the risks of continuing operations in such an unstable environment outweigh the potential benefits.”

The firm clearly lays the blame at the feet of the exchanges they used to leverage trade, stating that they could not execute their planned trades due to the platforms being offline:

A number of respectable exchanges, platforms, and tools that we use daily have halted their operations during the selloff, significantly hindering our ability to act accordingly.

BitMEX to Blame for Adaptive Capital Collapse?

Although the letter doesn’t name the exchanges, it was widely reported that BitMEX experienced a 45-minute outage right at the time of the crash on March 12th, suggesting that this was indeed this platform that they used.

BitMEX initially blamed their cloud service provider, Amazon Web Services (AWS), for the outage, although it was quickly discovered that AWS suffered no such problems at the time of BitMEX’s failure.

BitMEX Blames DDoS Attacks

A blog post days later attributed the malfunction to two DDoS attacks which crippled the system, although by this time accusations had surfaced that BitMEX has crashed their own system to increase the BitMEX Insurance Fund, which is supposed to fill the liquidity pool in times when it is in danger of running dry and act as a fund from which to refund customers who lose out unfairly.

Compared to other platforms, who used their insurance funds to prop up the liquidity pool during the chaotic trading, BitMEX actually increased the amount in their insurance fund by collecting on margin calls. This has led to sharp criticism, and is a perfect example of why crypto hedge funds and individuals alike are moving to other platforms, and why governments are warning against using BitMEX.