Crypto Liquidations Break $2 Billion As Bitcoin & Alts Crash

Data shows the cryptocurrency sector has witnessed a massive amount of liquidations after the crash that Bitcoin and company have gone through.

Crypto Derivatives Market Has Just Seen A Long Squeeze

According to data from CoinGlass, a large amount of liquidations related to cryptocurrency contracts has occurred on the derivatives platforms during the past day. “Liquidation” here refers to the forceful closure that any open contract undergoes by its exchange after it has amassed losses of a certain degree (the exact percentage of which is dependent on the platform).

There are mainly two factors that can significantly affect the chances of a contract finding liquidation. The first one is volatility. An asset that tends to be volatile is naturally harder to predict, so the risk of liquidation can be higher.

While volatility is something that’s not really in the hands of an individual trader, the second factor, the leverage, is. “Leverage” is a loan amount that any investor can opt for against their initial position.

The advantage of leverage is that any profits earned by the holder are multiplied by the same multiplier as the leverage. While this can sound lucrative, it’s also true that any losses incurred become more by the same magnitude. Thus, it takes a smaller price move in the opposite direction to the bet for the same position to get liquidated when leverage is in the picture.

In the cryptocurrency sector, coins often display volatility and speculative demand can be heavy. The result is that mass liquidation events, popularly known as squeezes, happen on the regular.

Bitcoin and the altcoins have displayed some sharp price action during the past day, so it’s not surprising to see that such an event has occurred in the derivatives market yet again.

The data for the liquidations that have taken place during the last 24 hours | Source: CoinGlass

As is visible in the above table, liquidations across the cryptocurrency derivatives sector have crossed the $2.32 billion mark in the last 24 hours. Even by the market’s standards, this is a massive figure.

Around $1.93 billion of the liquidations, equivalent to over 83% of the total, have involved the long holders. Bitcoin and others have crashed in this window, so it makes sense that those betting on a bullish outcome would be affected the most heavily.

Still, shorts haven’t entirely been spared, as around $387 million positions associated with them have also been shut down with the rebound that BTC has seen from its lows.

Interestingly, while Bitcoin generally tops the list of liquidations, Ethereum (ETH) instead has come first this time, with around $613 million in contracts related to it involved in the event.

The breakdown of the latest liquidations by symbol | Source: CoinGlass

ETH seeing almost $200 million more liquidations than the number one cryptocurrency is likely down to the fact that it has seen a much larger price drawdown of around 16% during the past day.

Bitcoin Price

Bitcoin has seen some recovery since its plunge toward the $92,000 mark as its price is now floating around $95,300.

Looks like the price of the coin has gone through a rollercoaster in the past day | Source: BTCUSDT on TradingView

Featured image from Dall-E, CoinGlass.com, chart from TradingView.com