Crypto Market Sees $510M Futures Fall Out As Bitcoin Breaks $24.5k

Data shows that the crypto futures market has observed more than $500 million in liquidations as Bitcoin has risen above the $24.5k mark.

The Crypto Futures market has seen a flush of $510 million in the last 24 hours

In case anyone is unaware of what a “liquidation” is, it’s best to get a brief understanding of how margin trading on derivatives exchanges works.

When an investor opens a crypto futures trading contract, they must first put up some initial collateral, called the margin (which can be both in USD or in a coin like Bitcoin).

Against this margin, holders can choose to take on “leverage”, which is a loan amount often many times the original position.

The advantage of this leverage is that if the price of the asset the contract applies to ends up moving in the direction the user is betting on, the profit is as many times more as the leverage.

However, it is also true that any losses incurred will also be magnified by the same factor as the leverage. When such losses pile up and eat away a certain part of the margin, the exchange closes the position by force.

This is exactly what a liquidation is. Below is the data for the liquidations in the crypto futures market in the last 24 hours.

Looks like the cryptocurrency market has seen a large amount of liquidations today | Source: CoinGlass

As you can see above, a little more than $510 million was flushed out of the crypto futures market in the last day.

Nearly 80,000 traders were involved in this flush, and around $216M of the total liquidations took place in the last twelve hours alone.

More than 60% of the liquidations came from short contracts, a trend that makes sense as a surge in the price of Bitcoin and other coins was behind the majority of the flush.

Massive liquidation events like today’s are not particularly unusual in the crypto market. The reasons behind it are high volatility among most coins and easy access to huge amounts of leverage (many exchanges even offer 100 times the original position).

Due to these factors, uninformed margin trading in the cryptocurrency sector can prove to be quite risky.

BTC price

At the time of writing, Bitcoin’s price is hovering around $24.7k, up 7% in the last week. Over the past month, the crypto has increased by 18% in value.

The chart below shows the trend in the price of the coin over the last five days.

The value of the crypto seems to have spiked up during the last couple of days | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, chart from TradingView.com