Data shows crypto futures liquidation has reached $238 million in the last 24 hours as Bitcoin has been observed up 10%.
Bitcoin Liquidation Reaches $238 Million
Whenever an investor opens a futures contract on any derivative exchange, he must provide an initial guarantee called margin. The contract can be terminated if the owner suffers a loss that destroys a certain part of the boundary.
By “liquidation,” what is meant here is that the derivative exchange forcibly closes the contract when the loss of this particular title is accumulated (the exact percentage may vary from platform to platform).
One factor that can increase the risk of any contract being terminated is “influence.” Leverage is the amount of loans that shareholders can choose, and is generally equal to the initial position.
The benefit of this leverage is that the benefits that investors get now will be more. However, on the flip side, any losses that incurs will also be more by the same influencing factors.
In the crypto market, mass liquidation events are not an uncommon sight. There are mainly two reasons behind this; The first is that the general volatility of assets like Bitcoin can be quite high.
Another thing is that leverage as high as 50 or even 100 times the initial guarantee is usually quite accessible on many platforms. These two factors combined can mean that uninformed trading with high leverage can be quite deadly in this market.
Currently, below is the data for the liquidation that happened in the crypto futures market in the last 24 hours.
Looks like a pretty high amount of liquidations have taken place today | Source: CoinGlass
As you can see above, a total of $238 million worth of crypto futures contracts were liquidated in the past day. About $111 million of this happened in the last 12 hours.
About 80% of these futures flushes involved short contracts, which is a trend that makes sense since these mass liquidation events are triggered by rising asset prices like Bitcoin.
Mass liquidation events are called “blackmail”. Since the most recent leverage flush involves short contracts, this is an example of a “short squeeze.” A strange feature of the squeeze is that liquidations can cascade together during.
This happens because every time a large number of liquidations take place together, they just end up further amplifying the price swing that caused them to start with. This complete price move then led to further liquidation in the market. And, during squeezes, liquidations sort of cascade together.
BTC price
At the time of writing, Bitcoin is trading around $22,000, down 1% over the past week.
The crypto seems to have shot up during the past day | Source: BTCUSD on TradingView
Featured images from Pierre Borthiry – Peiobty on Unsplash.com, chart from TradingView.com