The data shows that the cryptocurrency futures market has seen around $ 150 million in liquidation on the last day as the price of Bitcoin falls below $ 22,000.
$ 150 million is liquidated in the crypto futures market in the past 24 hours
In case someone is not aware of what “liquidations” are, it is best to first take a brief look at how margin trading works, before jumping to the data.
When a user opens a futures contract on a crypto derivatives exchange, they must first provide an initial guarantee (in USD or any currency such as Bitcoin), called margin.
Against this margin, the user may want to take on “leverage” which is a loan amount often many times the initial position.
The advantage of this leverage is that if the price moves in the direction the user is betting, all profits earned are many times higher than the leverage.
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However, it is also true that any losses incurred are also amplified. When those losses consume a specific portion of the margin, the trade forcibly closes the position.
This is exactly what a liquidation is. The table below shows the data for liquidations in the crypto futures market over the past 24 hours.
Looks like a large amount of liquidations have taken place today | Source: CoinGlass
As you can see above, around $ 150 million in cryptocurrency futures has been liquidated in the last day alone. This leverage included approximately 57,000 contracts in total.
Just over $ 40 million of these liquidations occurred in the past twelve hours, suggesting that more than $ 100 million was liquidated in the previous 12 hours.
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This trend makes sense as those previous twelve hours overlap the price of Bitcoin observing a drop below the $ 22,000 mark.
Additionally, nearly 80% of the positions involved here were long, another fact that aligns as most of these liquidations were triggered by a drop in the prices of various cryptocurrencies.
Mass liquidations such as those of today are not particularly uncommon in the cryptocurrency world. The reasons behind this are the overall high volatility of the market and the easy accessibility to large amounts of leverage (many exchanges also offer up to 100x).
At the time of writing, Bitcoin’s price is hovering around $ 21.9K, down 2% over the past seven days. Over the past month, the cryptocurrency has gained 3% in value.
The chart below shows the trend in the price of the coin over the past five days.
The value of the crypto seems to have dropped down during the last few days | Source: BTCUSD on TradingView
Featured image from Pierre Borthiry on Unsplash.com, chart from TradingView.com