Data shows the crypto futures market has observed around $150 million in liquidations in the past day as the price of Bitcoin drops below $22k.
$150 Million Gets Liquidated In The Crypto Futures Market During Last 24 Hours
In case anyone isn’t aware of what “liquidations” are, it’s best to first take a brief look at the workings of margin trading, before jumping into the data.
When a user opens a futures contract on a crypto derivatives exchange, they first need to put forth some initial collateral (in USD or in any coin like Bitcoin), called the margin.
Against this margin, the user may wish to take on “leverage,” which is a loan amount often many times the initial position.
The benefit of this leverage is that if the price happens to move in the direction the user bet on, then any profits earned are as many times more as the leverage.
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However, it is also true that any losses incurred are also magnified. When such losses eat a specific portion of the margin, the exchange forcibly closes the position.
This is precisely what a liquidation is. The below table shows the data for liquidations in the crypto futures market over the last 24 hours.Looks like a large amount of liquidations have taken place today | Source: CoinGlass
As you can see above, around $150 million in crypto futures have been liquidated during the past day alone. This leverage flush included around 57k contracts in total.
A little more than $40 million of these liquidations took place in the last twelve hours, which suggests that more than $100 million was flushed out in the preceding 12 hours.
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This trend makes sense as those previous twelve hours overlap with the price of Bitcoin observing a drop below the $22k mark.
Also, almost 80% of the positions involved here were longs, another fact that lines up as most of these liquidations were triggered by a decline in prices of the various cryptos.
Mass liquidations like today’s aren’t particularly uncommon in the cryptocurrency world. The reasons behind that are high general volatility in the market and easy accessibility to large amounts of leverage (many exchanges offer even as high as 100x).
At the time of writing, Bitcoin’s price floats around $21.9k, down 2% in the last seven days. Over the past month, the crypto has gained 3% in value.
The below chart shows the trend in the price of the coin over the last 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