Bitcoin is showing strength like it hasn’t in weeks. Data Shows Crypto Futures Market Sees Over $500 Million in Liquidations as Bitcoin Rises Above $24,500
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Crypto Futures Market Sees Flow of $510 Million
In case anyone isn’t sure what “liquidation” means, it’s best to get a brief understanding of how margin trading works on derivative exchanges.
Notice
When an investor opens a crypto futures contract, they are first required to deposit collateral known as margin. This can consist of USD as well as a coin like Bitcoin.
Against this initial margin, holders can take advantage of “leverage”. That means a loan amount that is often a multiple of the initial position.
The advantage of this leverage is that if the price of the asset to which the contract relates moves in the direction promised by the user, the profit is much higher than the leverage.
However, any losses suffered are also multiplied – by the same factor as leverage. If such losses accumulate and eat up a certain portion of the margin, the exchange will forcefully close the position.
That’s what liquidation is. Below are the details of liquidations in the crypto futures market over the past 24 hours.
Crypto and bitcoin liquidation
As you can see above, just over $510 million was washed out of the crypto futures market during the last day.
Almost 80,000 traders were involved in this stream. About $216 million of the total liquidations occurred in the last 12 hours alone.
Short contracts accounted for more than 60% of the liquidations. A trend that makes sense in that Bitcoin and other coin price increases were responsible for most of the drift.
Massive liquidation events like today’s are not particularly uncommon in the crypto market. The reasons for this are the high volatility in most coins – and the easy access to huge leverage (many exchanges are even offering 100x the initial position).
Because of these factors, margin trading in the cryptocurrency sector can be quite risky.
What is the price of bitcoin doing?
At the time of writing, bitcoin is hovering around $24,700. It is up 3% over the past week. In the past month, the cryptocurrency has gained 18% in value.
The following chart shows the development of Bitcoin price over the last five days.
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Text credit: Bitcoinist
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