On November 11th November Bitfinex announced support for Bitcoin Cash hardfork happening on November 15th.
In the last days it has been more evident that the fork will likely result in two different chains, Bitcoin Cash ABC and Bitcoin Cash SV.
At the same time our BCH markets experienced a significant increase of Margin Short positions in quantity and size.
To prevent any risk of manipulation and hence to maintain a healthy market we have decided to use the Chain Split Tokens (CST) approach to govern this particular event.
Bitfinex is introducing new Chain Split Tokens (CSTs) that will allow traders to trade the anticipated Bitcoin Cash tokens resulting from the Bitcoin Cash hard fork implementations "ABC" and "SV" on November 15, 2018. We are designating these CSTs "BAB" (ABC implementation) and "BSV" (SV implementation).
These CSTs will trade against USD and BTC as pairs BAB/USD, BAB/BTC, BSV/USD and BSV/BTC. Margin/leverage will be unavailable. Users will be able to create or destroy these new CSTs in any amount using the Token Manager located in the Order Type drop down menu of the sidebar order ticket, or in the menu at the top of the UI. Upon creation by a user, the BCH will be debited from the user's account and an equivalent amount of BAB and BSV will be credited. Users will be able to reverse this process at any time using the Token Manager.
These CSTs will provide pricing continuity through the Snapshot Event. After the Snapshot Event, these pre-event CSTs will convert automatically to the post-event on-chain tokens. We will use the symbol "BAB" for Bitcoin Cash ABC and symbol "BSV" for Bitcoin Cash SV to designate the post-event on-chain tokens.
When the hard fork occurs, we will take a snapshot of all Bitcoin Cash balances and positions. BCH balances will be credited both BAB and BSV. Anyone who is short BCH during the Snapshot Event will have a their accounts debited BAB and BSV. If there is not enough BAB and BSV in the account, these users will have a negative balance of BAB and BSV. Anyone who is long BCH during the Snapshot Event will then have BAB and BSV credited to their account. In other words, outstanding positions (including margin positions) will be “claimed” and converted to currency balances. This will have the effect of margin funding being canceled and borrowers will need to restore their account to positive wallet balances in order to continue using the platform.
As an example: If a user holds 5 BCH and has and active 10 BCH/USD long margin trading position with a base price of 500 USD at the Snapshot Event, this user will see 5 BAB and 5 BSV credited based on his 5 BCH balance prior to the Snapshot Event. As a result of the active margin trading long position 10 BAB and 10 BSV will be credited and -5000 USD will be debited.
At the moment of the Snapshot Event (UNIX time 1542300000, i.e. 4:40:00 PM UTC, November 15th), we will immediately freeze all BCH balances and halt all BCH/XXX markets.
This freeze will last until the BAB and BSV accounting can be adequately prepared and addressed. We expect the process to be quick and automated, but we cannot guarantee that it will be immediate. BCH borrowers can hedge or estimate this liability with newly listed CSTs.
Anyone with a negative balance resulting from being a BCH borrower at the time of the fork will need to buy back into BAB and BSV before 31 December 2018 or risk having the system do it for them. Once all negative balances have been settled, we may, at our sole and absolute discretion, delist BAB or BSV and make withdrawals only available for a limited time. While we want to make such forks available to our customers, our limited and temporary support for them is not and should not be construed as support for any particular project.