Crypto Liquidations Hit $291 Million As Bitcoin Shows Volatility

Data shows that the crypto futures market has seen liquidations of around $291 million in the last day as Bitcoin has recorded heavy volatility.

The Crypto Futures Market has seen a large amount of liquidations today

According to data from CoinGlass, the crypto sector has seen a large-scale liquidation event in the past 24 hours. A “liquidation” occurs when a derivatives exchange must forcibly close a futures contract because the holder has accumulated losses that have eaten away a certain percentage of their original security (this percentage can vary from platform to platform).

In the crypto market, mass liquidation events, where a large number of traders have their contracts closed at once, are not an uncommon sight. There are mainly two reasons behind this.

First, most of the coins in the sector generally have high volatility, which means that their prices can sometimes fluctuate by large percentages in a short period of time. Naturally, this unpredictability can make futures trading more difficult.

The other factor at play is influence. “Leverage” is a loan amount that investors can choose to take against their original security, and it is often several times the security itself. In the crypto market, leverage amounts as high as 50x or even 100x can be readily available.

While leverage means that any profits that accrue are more in the same order of magnitude as leverage, it also means that losses are now many more as well. Thus, traders who choose very high leverage amounts may be at high risk of being liquidated, given how volatile the market can be.

Now, here is the data for the futures liquidations that took place in the crypto 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 observed a relatively high number of liquidations in the last 24 hours. The reason behind this is the volatility that Bitcoin and other coins experienced after the FED interest rate announcement yesterday.

In the last 24 hours, positions in crypto futures worth $291 million were liquidated, of which $132 million involved the Bitcoin futures contracts. In total, nearly 68,000 traders were liquidated in this mass leveraged flush.

Around $67 million of these liquidations came in the past 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 the prices of Bitcoin and others was observed in that 12-hour period.

71% of the total contracts liquidated over the last day belonged to long traders, which again makes sense as a net decline in the market took place during this period.

The reason why nearly 30% of investors were still short is that Bitcoin’s price had initially dipped below the $27,000 level, but then had a sharp pullback soon after, which ended up liquidating many shorts as well.

BTC price

At the time of writing, Bitcoin is trading around $27,700, up 11% in the last week.

Looks like the price of the asset has taken a plunge during the last day | Source: BTCUSD on TradingView

Featured image from Pierre Borthiry – Peiobty on Unsplash.com, chart from TradingView.com