Crypto Futures Market Sees $400M Cleared As Bitcoin Breaks $23k
Data shows that the crypto futures market has observed more than $400 million in liquidations in the last 24 hours as Bitcoin breaks above $23k.
More than $400 million in crypto futures liquidated in the last day alone
A “liquidation” occurs when losses accumulate in a futures contract and eat away a certain percentage of the initial margin or collateral (the exact portion depends on the derivatives exchange) so that the exchange forcibly closes the position.
Mass liquidations in the crypto market are not that unusual for a couple of reasons. First, the volatility of most coins (which are not stablecoins) is generally high, and even hourly fluctuations can sometimes be quite significant.
The second reason is that large amounts of leverage are quite available in most exchanges. “Leverage” is a loan value that any futures user can borrow against the margin. Many exchanges even offer figures as high as 100 times the starting position.
Although leverage can increase profits by several orders of magnitude if the bet works, the same applies to losses as well. This, combined with the volatile nature of even the largest coins like Bitcoin, can make uninformed margin trading in crypto futures quite risky.
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Now, here is the data for the liquidations that have happened in the cryptocurrency market in the last 24 hours:
The largest single liquidation in the last day measured more than $2 million in value | Source: CoinGlass
As you can see above, almost $405 million was flushed in the last 24 hours in the crypto futures market. About $133 million of these liquidations took place in the last twelve hours alone.
An event where large liquidations such as today’s occur are called a “squeeze”. During these events, a sudden price change causes many contracts to be closed at once, which only amplifies this price swing and leads to even more liquidations.
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Just under 100,000 traders were involved in today’s liquidation squeeze and more than 50% of the contracts closed belonged to shorts.
This trend makes sense as a majority of the liquidations would have been triggered by coins like Bitcoin observing a sharp rise in prices.
BTC price
At the time of writing, Bitcoin’s price is hovering around $23.1k, up 2% in the last seven days. Over the past month, the crypto has gained 11% in value.
The chart below shows the trend in the price of the coin over the last five days.
Looks like the value of BTC has surged up over the past couple of days | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, chart from TradingView.com
