Data shows that the crypto futures market saw nearly $350 million in liquidations in the past 24 hours as Bitcoin briefly slipped below $20,000.
About $348 million in crypto futures contracts were liquidated in the last day
In case anyone doesn’t know what a “wind-up” is, it’s ideal to first have a basic understanding of how margin trading works before diving into the data.
Whenever investors open a crypto futures trading contract on derivatives exchanges, they must first post an initial guarantee, called margin.
Against this margin, they can choose to take “leverage”, which is a loan amount often several times greater than the initial position.
The benefit of taking advantage of leverage is that if the price of the asset the contract is for ends up moving in the direction the investor bet on, then the profits made will be more of the same. magnitude than leverage.
However, it is also true that if the bet does not work out and the asset moves in the opposite direction, the losses incurred will also be multitudes more this time.
When such losses accumulate and eat away at a specific percentage of the margin, the exchange forcibly closes the position. This is precisely what a “liquidation” is.
Now, here is the data of the crypto futures market liquidations that have taken place in the last 24 hours (of all coins):
Looks like the market saw large amounts being flushed today | Source: CoinGlass
As you can see above, the crypto futures market has seen close to $350 million in liquidations over the past day.
Only $71 million of these liquidations took place in the past twelve hours, suggesting that the bulk of them took place in the previous half day.
75% of the total contracts involved in this futures wave came from long positions, a trend that matches the main trigger for the event was Bitcoin price falling below the $20,000 level.
Large liquidations like the one today are not particularly uncommon in the crypto market; the general high volatility of most coins, combined with the fact that leveraged options as large as 100x are readily available on many exchanges, means that leveraged trades can be risky business for uninformed traders .
As of this writing, the price of Bitcoin is hovering around $20.2000, down 5% in the past week. Over the past month, the crypto has lost 5% in value.
The chart below shows the price trend of the coin over the past five days.
The value of BTC seems to have plunged down over the last day | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko on Unsplash.com, chart from TradingView.com