Data shows that the crypto futures market saw nearly $300 million in liquidations over the past day, while bitcoin fell below $26,000.
Liquidations in the crypto futures market mount as Bitcoin and others crash
A futures contract is considered “liquidated” when the derivatives exchange with which the contract was opened compulsorily closes the position. A platform generally does this whenever the contract accumulates enough losses to wash away a defined percentage of the margin (the initial collateral).
There are a number of factors that can significantly increase the risk of contract termination. The first, of course, is the volatility of the asset for which the position is intended. In the crypto market, most coins show large fluctuations, making it more difficult to predict how the market will perform.
The other relevant factor here is leverage, which is an amount of credit that any investor can borrow against margin. Leverage is usually a multiple of the initial position itself, and the main benefit is that any profits made will be multiples higher.
Obviously, there’s also the catch that the losses suffered would also be higher by the same factor. Many crypto derivatives exchanges offer easy access to leverage amounts up to 100x the position, so high leverage can accumulate at certain points in the market.
Such a highly leveraged environment combined with the general volatility of coins often results in mass liquidations that often occur in the digital asset futures market.
There was another event of this nature last day as well. Here is a table showing the relevant data on this leveraged flush:
It looks like a large number of liquidations have been observed in the last 24 hours | Source: CoinGlass
As you can see above, there were about $296 million worth of total crypto liquidations in the last day. However, only about $16 million of those liquidations took place in the past 12 hours, meaning the majority of the flood took place in the previous 12 hours.
The high price volatility of assets like bitcoin fell into that half-day, so it would make sense that futures liquidations were also largely included.
Volatility has been almost exclusively to the downside over the past day, prompted by news that the US Securities and Exchange Commission has sued Binance and its CEO. BTC has seen a plunge below $26,000 during this volatile event, so it is not surprising that the vast majority of deleted contracts ($271 million) were long positions.
Below is another table that breaks down these liquidations by symbol. From this it can be seen that bitcoin futures contracts alone have liquidated about $111 million in the last 24 hours, which is significantly more than any other coin.
BTC appears to be at the top of the liquidation list | Source: CoinGlass
BTC price
At the time of writing, Bitcoin is trading around $25,700, down 8% over the past week.
BTC crashed last day | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, chart from TradingView.com
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