Data shows the crypto futures market has seen liquidations amounting to about $291 million in the last day as Bitcoin has registered sharp volatility.
Crypto Futures Market Has Seen A Large Amount Of Liquidations Today
According to data from CoinGlass, the crypto sector has seen a largescale liquidation event in the past day. A “liquidation” occurs when a derivative exchange has to forcefully close a contract on the futures market because the holder has accumulated losses that have eaten away a specific percentage of their initial collateral (this percentage can differ from platform to platform).
In the crypto market, mass liquidation events, where a large number of traders get their contracts closed at once, aren’t an uncommon sight. There are mainly two reasons behind this.
First, most of the coins in the sector have generally high volatility, meaning that their prices can sometimes swing by large percentages in a short period of time. Naturally, this unpredictability can make futures trading harder.
The second factor at play is leverage. “Leverage” is a loan amount that investors can choose to take against their initial collateral, and it is often several times the collateral itself. In the crypto market, leverage amounts as high as 50x or even 100x can be easily accessible.
While leverage means that any profits incurred are more by the same magnitude as the leverage, it also implies that losses are now multitudes more as well. Thus, traders that opt for very high leverage amounts can be at quite the risk of getting liquidated, given how volatile the market can be.
Now, here is the data for the futures liquidations that took place in the crypto sector during the past 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 amount of liquidations in the last day. The reason behind this is the volatility that Bitcoin and other coins experienced after the FED rate announcement yesterday.
In the last 24 hours, $291 million worth of crypto futures positions were liquidated, $132 million of which involved the Bitcoin futures contracts. In total, almost 68,000 traders were liquidated in this mass leverage flush.
About $67 million of these liquidations came in the past twelve hours, meaning that the preceding half-day period saw the vast majority of the 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 that were liquidated in the past day belonged to long traders, which again makes sense as a net decline in the market took place in this period.
The reason that almost 30% of the investors were still short traders is that Bitcoin’s price had initially plunged below the $27,000 level, but then had a sharp rebound back above it soon after, which ended up liquidating a lot of shorts as well.
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