Crypto Liquidations Hit $291M As Bitcoin Shows Volatility
Data shows that the crypto futures market saw liquidations worth around $291 million over the last day as Bitcoin saw strong volatility.
The crypto futures market saw a huge amount of liquidations today
According to data from CoinGlass, the crypto sector has experienced a large-scale liquidation event over the past day. A “liquidation” occurs when a derivatives exchange needs to forcibly close a futures contract because the holder has accumulated losses that have eaten up a specific percentage of its initial collateral (this percentage can vary from platform to platform).
In the crypto market, mass liquidation events, where large numbers of traders close their contracts all at once, are not an uncommon sight. There are mainly two reasons behind this.
First, most coins in the industry generally have high volatility, which means that their prices can sometimes fluctuate by large percentages in a short period of time. Of course, this unpredictability can make futures trading difficult.
The second factor at play is leverage. “Leverage” is a loan amount that investors can choose to take against their initial collateral, and is often several times the collateral itself. In the cryptocurrency market, leverage values up to 50x or even 100x can be easily accessed.
While leverage means that any profits incurred are greater by the same magnitude as leverage, it also implies that losses are now much greater as well. Thus, traders who opt for very high leverage values may run the risk of being liquidated, given the volatility of the market.
Now, here is the data from the futures liquidations that took place in the cryptocurrency sector in the last 24 hours:
A lot of liquidations seem to have taken place during the past day | Source: CoinGlass
As you can see above, the crypto market has seen a relatively high amount of liquidations in the last day. The reason behind this is the volatility that Bitcoin and other currencies experienced after the FED rate announcement yesterday.
In the last 24 hours, $291 million worth of crypto futures positions were liquidated, of which $132 million involved Bitcoin futures contracts. In total, nearly 68,000 traders were liquidated in this mass leverage dump.
Around $67 million of these liquidations took place in the last twelve hours, meaning that the previous half-day period saw the vast majority of total liquidations. This adds up, as most of the volatility in Bitcoin and other prices has been seen in this 12-hour period.
71% of the total contracts settled the previous day belonged to long traders, which again makes sense as there has been a net decline in the market over this period.
The reason why nearly 30% of investors were still short traders is that the Bitcoin price initially dropped below the $27,000 level, but then had a strong rally above it soon after, which ended up liquidating many shorts as well.
At the time of writing, Bitcoin is trading around $27,700, up 11% over the last week.
Looks like the price of the asset has taken a plunge during the last day | Source: BTCUSD on TradingView
Featured image of Pierre Borthiry – Peiobty on Unsplash.com, chart from TradingView.com