Emily Walker
Recent statistics indicate that the cryptocurrency market has experienced significant liquidations following the recent decline in Bitcoin and other cryptocurrencies.
Long Squeeze in the Crypto Derivatives Market
Data from CoinGlass reveals that numerous liquidations related to cryptocurrency contracts have taken place on derivatives exchanges over the past day. “Liquidation” refers to the automatic closure of open contracts by the exchange when losses reach a certain threshold, which varies by platform.
Two key factors influence the risk of liquidation for a contract. The first is volatility, which makes predictions more challenging and increases liquidation risk. The second factor, leverage, is controllable by traders. Leverage allows investors to borrow against their initial investment, amplifying potential profits, but it also increases losses proportionately, leading to quicker liquidations with smaller adverse price movements.
The cryptocurrency market is characterized by volatility and speculative trading, resulting in frequent mass liquidation events, commonly referred to as squeezes.
In the past day, both Bitcoin and altcoins have experienced notable price fluctuations, leading to these events occurring once again in the derivatives market.
According to the data presented, liquidations in the cryptocurrency derivatives market have surpassed $2.32 billion within 24 hours, which is a remarkable figure by any standard.
Approximately $1.93 billion, or over 83% of the total, were liquidations impacting long positions. With Bitcoin and other cryptocurrencies falling, it is understandable that those with bullish positions were most affected.
However, shorts were not completely insulated, as about $387 million in short positions were also liquidated during Bitcoin’s recovery from its recent lows.
Interestingly, although Bitcoin usually leads in liquidation amounts, this time Ethereum (ETH) took the top spot, with around $613 million in related contracts liquidated.
The substantial liquidation of ETH, nearly $200 million more than Bitcoin, is likely due to its more pronounced price drop of about 16% in the last day.
Current Bitcoin Price
After a decline that brought its price near $92,000, Bitcoin has begun to recover, now hovering around $95,300.