Zhao Dong: Forced Liquidate 9,000 BTC On Bitfinex In One Day
Zhaon Dong has many titles. He was first known as co-founder of Moji Weather, CTO of Garage Café. But he was better known as an early adopter of bitcoin both as speculator and miner in the community. Recently, he shared his experience and thoughts since he got involved in bitcoin in 2013. He lost 9,000 btc in a single day when his margin position on Bitfinex was forced liquidated on 10 February 2014. He once thought of killing himself but he managed to pay back 150 million yuan debts in two and half years. Now he is the shareholder of Bitfinex and the biggest OTC dealer in the market.
Zhao Dong and Wu Gang (founder of Bixin, formerly known as haobtc) together in 2016
In 2013, ZhaoDong chose to sell off his shares on Moji weather app and got 10 million yuan in hand. In April 2013, he heard of bitcoin in Garage Cafe in Beijing. Deeply intrigued by the peer to peer electronic cash, he soon invested in the cryptocurrency. The price pump in late 2013 drove his wealth to around 100 million, which was accompanied with fast ego boost. Soon he thought he could manipulate the market and started leverage trading on exchanges. After multiple forced liquidations, he lost all his earning and found himself buried in 60 million CNY debt.
To back the claim that he suffered heavy loss from forced liquidation in Bitfinex on 10 February 2014, he posted screenshots of email between GianCarlo, founder of Bitfinex.
“I know today my margin was danger and had a margin call. But I don’t know why the price could drop so quickly and go to 100 USD? Isn’t your order combined with Bitstamp liquidity? I lost 4500btc today.”
GianCarlo explained the situation to Zhao:
“Your forced liquidation was actually triggered at a much higher price than 100 and due to the very high quantity it quickly depleted all of our coins on Bitstamp.
We had several thousands of them but they all went in a couple of minutes due to your forced liquidations. After we could not sell anymore on Bitstamp we were left with only our orderbook and price dropped sharply as the bids were almost non existant at that point.
It touched 100 usd and made us lose money too.
Luckily we had a lot or(of) reserves and we can cover for this losses. We stopped trading until when we received new coins on Bitstamp. We are now doing the aftermath of the whole crash and will let you shortly know the result of it.
Your other positions were frozen so you didn’t lose from them and I hope you appreciate it. ”
There was a clear dipping on Bitfinex on 10 February 2014.
According to Zhao, actually he lost 9,000 btc that single day, which was worth 8 million USD at that time. And it was only the beginning.
“In fact, my total loss in 2014 was around 150 million yuan. Because I started one of the biggest mining operations in China. “
A documentary film can prove that.
“My mining farms are located in four places: Shanxi, Inner Mongolia, Sichuan, and Shenzhen. To do this, I have to raise funds again (new debt) due to lack of funds. The early payback of mining was good. Machine started running in February and the initial investment was paid back in April.”
It was 100% return in 2 months, which could not be found in any other business. After several round of fund-raising, Zhao quickly grew the scale of mining operations and became one of biggest miners in China. However, his ambition was once again frustrated as bitcoin price kept falling throughout 2014. Soon the output of mining was not able to cover utility bill. He had to sell all of his miners in early 2015 when btc dropped to around 900 Yuan. He recovered around 3 million yuan from the original 50 million investments. He was grateful for that as few people were to buy in that market at that time.
It’s not difficult to imagine the pressure on him and the debts were like mountains to a family. He admitted killing himself did cross his mind but he choose to face the difficulty.
In my darkest hour, I have only 100,000 yuan and 60 million debt. And next month, I must pay 50 thousand for my son’s schooling. The idea lurking in my head is I must not commit suicide if I am part of a great movement. I must not switch to other business. (In fact, I might be able to repay my colossal debt if I opt to other business.)
Several days ago, Mao (founder of f2pool)disclosed that one bitcoin speculator killed himself after forced liquidation.
He is willing to share his personal experience now only because the wound was healed, which means he already paid back the debts. But how?
I was doing OTC trading with the credit that I have earned in the past. In the worst time, I could only make 60 yuan from a 3,000-yuan deal. My highest deal is nearly 100 million USD.
As personal credits are the most valued asset in OTC market, he quickly became the biggest OTC dealer in China or even in the world. On a weibo released in 2015, he claimed that he had already closed 3,167 deals with a total of around 200,000 btc. And that was around three years ago before the authority closed bitcoin exchange in China.
Speaking of lessons learned, Zhao gave the following advice:
First of all, I must honestly say that we can’t really “predict the market”. Otherwise, we can make money through speculation. Why do we bother to work?
Secondly, allocate funds carefully.
“In terms of fund allocation, I don’t do “all in” nor leveraging now. I am in awe of risk.”
The last advice is that survival and commitment is very important.
“The blockchain technology of bitcoin is not just one ordinary technology. It would have profound impact on the development of human history. If everyone thinks like me, then what I am doing doesn’t matter. What matters is that how I can be part of this revolution. “
Zhao’s story clearly shows that the key to success is to survive longer rather than growing bigger in the crypto world. We have witnessed coming and going of people around crypto and blockchain over time. And time tells the difference between people.