Bitcoin Crash: Derivative Traders Lose $202 Million In 24 Hours
The cryptocurrency market suddenly turned red on March 10 in the worst sell-off of the year. Bitcoin has dropped below $20,000 for the first time in three months, and market sentiments are bearish. The aftermath of the crash had traders reeling with millions of dollars in active trading positions liquidated during this period.
Derivatives traders suffer big losses
According to data from CoinGlass, derivatives traders lost about $202 million in the last 24 hours. Leveraged trading or futures trading is when traders speculate using derivatives or borrowing from the exchange.
In this type of market, traders can go long (speculating a rise in the currency) or short (speculating a fall in the price). When the price reaches a certain level contrary to the trading position, the trade is liquidated and the trader loses his capital.
Data from CoinGlass further shows that BTC has the highest settlement volumes of over $60 million, with Ethereum coming in second with $52 million. This is not surprising as they are the two most traded tokens in the crypto market.
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The liquidation numbers are the highest recorded since mid-January. At that time, the bear market movement saw more than US$490 million liquidated in a single day on different exchanges.
Factors Affecting the Crypto Market Crash
The sharp price drop that affects the cryptocurrency market comes after recent developments. Crypto bank Silvergate reported on March 9, 2023 that it would cease operations. This comes less than a week after Silvergate Capital Corporation indicated it was assessing whether to continue operating this year and closed its crypto payment network.
These negative sentiments continued with the news that New York Attorney General Letitia James has formally sued cryptocurrency exchange Kucoin. According to the lawsuit, Kucoin offered, sold and bought securities without the necessary registration. He also claims that ETH, the native token of the Ethereum blockchain, is a security. According to James, ETH fits the definition of securities, as they represent the investment of money in ordinary companies, with profits derived mainly from the effort of others.
Related Reading: Silvergate will close the bank and reduce operations
The prosecutor alleges that Kucoin, one of the oldest exchanges, is engaged in the business of selling and offering to sell commodities through accounts, agreements or contracts to New York accounts primarily for investment purposes.
In addition to just crypto, some external factors have affected the market with recent predictions from the US Federal Reserve. Jerome Powell, chairman of the Fed, declared before the US Senate Banking Committee that the economic outlook was not what was expected for this quarter.
The inflation forecast is likely to lead to higher-than-expected interest rates during the Fed’s next meeting scheduled for March 22.
Bitcoin has recovered slightly from its slump and is currently trading for $20,126 at the time of writing.
Featured image from Unsplash, charts from Coinglass.com and Tradingview.com