Bitrabo Editorial
The crypto futures market has recorded nearly $300 million in liquidations in the last 24 hours as Bitcoin drops below $26,000, according to data.
Mass liquidation of crypto futures contracts
A futures contract is considered “liquidated” when the exchange that opened the contract closes it forcefully. This is typically done when the contract has sustained substantial losses that have wiped out a predefined percentage of its margin or initial collateral.
Two factors that increase the risk of contract liquidation include the high volatility of the assets and the leverage amount taken by investors against the margin. Most coins in the crypto market experience high fluctuations, which makes it hard to predict market movements. Crypto derivative exchanges offer leverage amounts as high as 100 times the initial position, magnifying both profits and losses and leading to mass liquidation events in the digital asset futures market.
Another event of this nature has occurred in the past day. Data shows that there has been a total of around $296 million in crypto liquidations in the last 24 hours. However, only around $16 million of these liquidations happened in the preceding 12 hours, indicating that most of the liquidations took place in the prior 12 hours.
Bitcoin’s price has seen significant volatility in the last day, largely due to news of the US SEC suing Binance and its CEO. As a result, BTC has plunged below the $26,000 level, causing the flushing out of almost all long position contracts ($271 million).
The Bitcoin futures contract alone saw about $111 million in liquidations during the same period, significantly more than any other coin.
Bitcoin’s current price
At the moment, Bitcoin is trading around $25,700, down 8% in the last week.
BTC has crashed down in the past day | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, chart from TradingView.com