Data shows the crypto futures market has observed liquidations amounting to $280 million in the last 24 hours as Bitcoin broke above $22k.
76% Of The Crypto Futures Positions Liquidated In Past 24 Hours Were Shorts
In case anyone is unaware what “liquidations” are, it’s best to first take a look at a brief explanation of margin trading.
Whenever an investor opens a contract on a derivatives exchange, they have to first put forth some initial collateral, called the margin.
Against this margin, the investor may choose to take on leverage, which is a loan amount often many times the initial position.
The benefit of leveraged trading is that any profits earned become more by the same factor as the leverage value.
However, it is also true that if the price of the asset moves in the direction opposite to the one the investor bet on, then any losses incurred will also be multitudes more now.
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When these losses eat up a certain percentage of the margin, the exchange forcibly closes the position. This is exactly what a liquidation is.
The below table shows the liquidations data for the crypto futures market over the past day.
Looks like a large amount was flushed from the futures market during the past day | Source: CoinGlass
As you can see above, liquidations in the crypto market added up to more than $280 million over the last twenty-four hours.
These belonged to a little over 65k traders on derivatives exchanges. Around $136 million of the liquidations was flushed within the last twelve hours.
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76% of the positions over the last 24 hours belonged to short traders. This makes sense since most of these liquidations were triggered by a surge in prices of coins like Bitcoin.
Massive leverage flushes aren’t an uncommon sight in the crypto world due to the volatile nature of most coins and leverage options as large as 100x being available on many exchanges.
At the time of writing, Bitcoin’s price floats around $21.5k, up 11% in the last seven days. Over the past month, the crypto has lost 31% in value.
The below chart shows the trend in the price of the coin over the last five days.
The value of the crypto seems to have seen a sharp increase over the past couple of days | Source: BTCUSD on TradingView
After weeks of mostly sideways movement, Bitcoin seems to have once again come to life during the last few days as the crypto has been catching some upwards momentum.
Featured image from Dmitry Demidko on Unsplash.com, chart from TradingView.com