Data shows that the crypto futures market has seen liquidations amounting to $280 million in the last 24 hours as bitcoin broke above $22k.
76% of crypto futures positions were liquidated in the last 24 hours
If one has no idea what “liquidations” are, it’s best to first take a look at an acronym for margin trading.
Whenever an investor opens a contract on a derivatives exchange, they are first required to offer some initial collateral, which is called margin.
Against this margin, the investor may choose to take leverage, which is a loan amount that is often several times higher than the initial position.
The advantage of leveraged trading is that any profit earned is exceeded by the same factor as the leveraged value.
However, it is also true that if the asset’s price moves in the opposite direction to the investor’s bet, any losses will now be even greater.
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When these losses eat up a certain percentage of the margin, the exchange forcibly closes the position. It really is a liquidation.
The table below shows liquidation data for the crypto futures market in the past days.
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 have exceeded $280 million in the last twenty four hours.
These belonged to over 65k traders on derivatives exchanges. Around $136 million were liquidated within the last twelve hours.
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In the last 24 hours, 76 per cent of the positions were held by short traders. This is understandable as most of these liquidations were triggered by a rise in the prices of coins such as bitcoin.
Massive leverage flushes are not an uncommon sight in the crypto world due to the volatile nature of most coins and the large leverage options up to 100x available on many exchanges.
At the time of writing, bitcoin price is floating around $21.5k, up 11% over the past seven days. In the past month, crypto has lost 31% in value.
The chart below shows the coin’s price trend over the past 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 several weeks of sideways movement, bitcoin has once again come to life during the past few days as the crypto seems to be catching some upward momentum.
Featured image from Dmitry Demidko on Unsplash.com, chart from TradingView.com