Crypto sees $212 million in liquidations as Bitcoin breaks $24k
Data shows that the crypto futures market has observed around $212 million in liquidations over the past 24 hours as Bitcoin has surged above $24,000.
Crypto Liquidations Measure Around $212 Million In Last 24 Hours, 88% Shorts
To open a contract on the crypto futures market, the holder must first post some initial collateral. A “liquidation” occurs when the holder’s bet fails (meaning the price of the asset moves in the opposite direction to what the investor bet on) and a specific percentage of this initial security has been eaten away by the losses.
This percentage can vary from platform to platform, but when losses hit this mark, derivatives exchanges usually close the position (or “liquidate” it).
One factor that increases the risk of a contract being liquidated is influence. Against the original position, any holder can choose to take on a certain leverage, which is a loan amount that is often several times more than the position itself.
While leverage means that any profits that the holder accumulates are now also greatly increased (compared to if the holder had not taken on any leverage at all), the same is true of losses as well.
In the crypto market, mass liquidation events (called squeezes) are not an uncommon sight due mainly to two factors. Firstly, the assets in the sector are generally quite volatile, which means that prices can sometimes observe large unexpected fluctuations.
And secondly, using as high as 50, or even 100, times the original position is usually quite available on many derivatives exchanges. Trading with high leverage in a volatile market like this can be a deadly combination, especially for uninformed traders.
A large amount of futures liquidations have also taken place over the past 24 hours, as the data below shows:
The total liquidations that have occurred in the last day | Source: CoinGlass
As you can see above, the crypto futures market has seen liquidations totaling $212 million in the last 24 hours. The main trigger behind this flush was a market-wide price rally led by Bitcoin as the asset shot up and broke above the $24,000 level.
Since the reason for the liquidations here was a price increase, it is not a surprise that 88% of the contracts that were liquidated were shorts. As such, this was an example of a “short squeeze”. Squeezes are events where a large number of liquidations coincide and further amplify the price movement that caused them (thus causing even more liquidations in the process).
It also appears that only $54 million of the liquidations came in the last 12 hours, suggesting that the previous 12-hour period bore the brunt of the blow. This trend also makes sense, as the bulk of the volatile price action took place within that period.
Bitcoin price
At the time of writing, Bitcoin is trading around $24,500, up 8% in the past week.
Looks like BTC has shot up in the past day or so | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, chart from TradingView.com
