Crypto liquidations at $354M as BTC shows wild volatility
Data shows that the crypto futures market has seen liquidations of around $354 million in the past 24 hours as Bitcoin has shown wild volatility.
The Crypto Futures Market has observed mass liquidations over the past day
The “liquidation” of a crypto futures contract occurs when the exchange forcibly closes the position due to the holder accumulating losses equal to a specific percentage of the margin (the first collateral).
A factor that can significantly increase the risk of a contract being liquidated is “leverage”, which is a loan amount that an investor can choose to take against the margin, and it is often many times the size of the initial position itself.
The obvious advantage of leverage is that if the bet works and the price moves in the direction of profit, the gains made will be more in the same order of magnitude as the leverage. However, there is a definite downside to that too; any losses incurred by the investor will also be many more due to the leverage.
In the crypto market, leverage amounts as high as 50x or even 100x the starting position can be quite available on many derivatives platforms. Because of this reason, leveraged positions can often pile up in the market.
Most of the assets in the sector are generally quite volatile, so the risk of being liquidated with highly leveraged positions is even greater in this market. As a result, mass liquidation events are not an uncommon sight, showing how dangerous high leverage trading can be for uninformed traders.
A mass liquidation event has also taken place in the crypto market in the last 24 hours. Here are the numbers involved in this futures leveraged flush:
Looks like a very high amount of liquidations have occurred during the past day | Source: CoinGlass
As you can see above, around $353.8 million in crypto futures contracts have been liquidated in the last 24 hours. In total, around 78,000 traders took the hit in this leverage flush.
The root cause of these large liquidations is the volatility that has been inflicted on the price of Bitcoin over the past 24 hours. BTC first climbed very quickly towards the $30,000 mark from mid-$28,000 levels, but a few hours later, the digital asset saw a sharp crash back to values below $28,000.
That wasn’t all, as the coin quickly put together recovery efforts and rose to around the $29,000 level (around which it still floats) once again. These sharp swings naturally cleared out the futures market, causing Bitcoin-linked positions alone to see $173 million in liquidations.
As the sharpest part of the price action was the one that saw a flash crash, the majority of liquidations over the past day involved long contracts. Although, 40% of the contracts liquidated were still shorts, meaning that the split was not quite as one-sided, even if it tended towards long dominance.
BTC price
At the time of writing, Bitcoin is trading around $28,900, up 1% in the past week.
The crypto has seen some wild volatility today | Source: BTCUSD on TradingView
Featured image from Pierre Borthiry – Peiobty on Unsplash.com, chart from TradingView.com
