Liquidations in the crypto market have amounted to more than $830 million over the last 24 hours, as Bitcoin has crashed below the $18k level.
$832 Million In Crypto Futures Was Liquidated During The Past Day
In case anyone is unaware of what a “liquidation” is, it’s best to get a brief understanding of the workings of margin trading first, before diving into the data.
When an investor opens a cryptocurrency futures contract on any derivative exchange, they first have to put forth some collateral, called the “margin.” This amount can be both in USD and in a crypto like Bitcoin.
Against this margin, the investor may choose to take on “leverage,” a loan value often many times more than the initial position.
The benefit of leverage is that if the price of the asset moves in the direction the contract holder bet on, the profits earned are then magnitudes more by the same factor as the leverage.
However, it’s also true that in the case the bet fails and the price swings the opposite way, the losses incurred would also be much larger.
When such losses eat away a specific portion of the margin, the exchange has to forcibly close the position. This is precisely what a liquidation is.
Now, here is the data for the liquidations taking place in the crypto market over the last day:
Looks like a massive amount of liquidations took place during the past day | Source: CoinGlass
As you can see above, there has been a total flush of around $832 million in the crypto market over the last 24 hours.
Almost $200 million of these took place within the last twelve hours, suggesting the bulk of the futures flush occurred in the preceding 12-hour period. This trend makes sense as cryptos like Bitcoin observed higher volatility during this period.
Further data reveals that 72% of the contracts involved in this liquidation squeeze belonged to the long traders; another fact that isn’t surprising as most of the liquidations were triggered by the crashes in BTC and other crypto’s prices.
At the time of writing, Bitcoin’s price floats around $17.5k, down 13% in the last week. Over the past month, the crypto has lost 9% in value.
Below is a chart that shows the trend in the price of the coin over the last five days.
The value of the crypto seems to have observed some sharp downtrend during the past couple of days | Source: BTCUSD on TradingView
Featured image from mana5280 on Unsplash.com, chart from TradingView.com