Bitrabo Editorial
Recent data reveals that the crypto futures market has experienced liquidations totaling almost $180 million in the past day as Bitcoin surges towards $29,000.
High Levels of Liquidations in Crypto Futures Market in the Last 24 Hours
When a futures contract is “liquidated,” it means that the holder has accumulated losses equivalent to a specific percentage of the initial collateral or margin. This leads to the derivative exchange forcibly closing the contract.
In the cryptocurrency sector, it is not uncommon to witness a large number of liquidations occurring simultaneously due to the nature of the market. Two factors that significantly affect the risk of a contract being liquidated are the leverage used by the investor and the volatility of the coin in question.
“Leverage” refers to the loan amount taken by an investor against the margin. The advantage of using leverage is that any profits earned will be multiplied by the same factor as the leverage. However, losses are also magnified by the leverage. In the crypto sector, many exchanges offer high leverage options, even up to 100 times the position.
Most assets in the cryptocurrency market are generally quite volatile, with significant price fluctuations occurring within a single day. For example, Bitcoin has experienced an 8% movement in the past 24 hours.
Combining both factors mentioned above, it becomes clear why the futures market can be risky for uninformed traders in the crypto sector.
In the past day, there has been significant price action resulting in a large number of trader liquidations.
Here are the numbers associated with this liquidation event:
A considerable amount of liquidations occurred in the past day | Source: CoinGlass
As seen above, nearly $180 million in crypto futures contracts have been liquidated in the last 24 hours. The majority of this liquidation (approximately $145 million or 77%) seems to involve short traders. This is to be expected as the rapid increase in Bitcoin and other asset prices has triggered this mass liquidation event.
In terms of individual contributions to this liquidation event, Bitcoin appears to account for the largest portion with around $89 million, as shown in the data below.
BTC is at the top of the list | Source: CoinGlass
Ethereum has seen the second largest liquidations in the market, amounting to approximately $27 million, while Litecoin comes in third at around $3 million.
Bitcoin Price
At the time of writing, Bitcoin is trading around $28,900, marking an 11% increase in the past week.
BTC has experienced a sharp surge in the past day | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, chart from TradingView.com