According to data, the cryptocurrency futures market took a beating of $380 million over the course of the day. Bitcoin is now above $30k. Short traders have received $240 million in liquidations.
Crypto Shorts Have $240 million in Liquidations in the Last 24 hours
In case anyone isn’t aware of what “liquidations” are, it’s best to first take a brief look at the workings of margin trading in the crypto futures market.
When an investor opens a, say, Bitcoin long or short contract at a derivatives exchange, they first have to put forth some collateral called the “margin.” This margin can be in BTC, any other coin, or even fiat.
Against this margin, the investor may choose to take on “leverage,” a loaned amount often many times the initial position.
Leverage is a way to make more money if prices move in the same direction as the bet.
Bitcoin Bloodbath Awakens Sleepy Giant As Spot Volumes Surge| Bitcoin Bloodbath Awakens Sleepy Giant As Spot Volumes Surge
It is true, however that losses will be many times greater. The exchange will forcefully end the Bitcoin position if such losses consume a portion of its margin.
This is what liquidation is. This table lists the liquidations of crypto markets over the past 24 hours.
Source: CoinGlass| Source: CoinGlass
You can see that the cryptocurrency market suffered heavy liquidations in the last day. $184 Million was received within the past 24 hours.
The majority of liquidations were done by short-term traders. This makes sense, as Bitcoin has seen a huge rebound today.
Source: CoinGlass| Source: CoinGlass
It seems that more than $240million has been liquidated by short traders.
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Large liquidations like today’s aren’t particularly uncommon in the crypto market. These large liquidations can be attributed to several factors.
This is due to the volatility of coin prices. Even coins as large and valuable as Bitcoin and Ethereum are susceptible to swings of significant magnitude in short periods.
Another factor contributing to this phenomenon is that some derivatives exchanges can offer up to 100x leverage.
Trading in crypto is a highly volatile market and traders that aren’t well-informed can increase the likelihood of liquidations.
Bitcoin price
At the time of writing, Bitcoin’s price floats around $30.5k, down 15% in the past week.
According to TradingView, the price of Bitcoin seems to be on the rebound since the crash. Source: BTCUSD.| Source: BTCUSD on TradingView
Featured image taken from Unsplash.com. Chart from TradingView.com.