As an experienced financial analyst, I’ve seen my fair share of market volatility and liquidation events in the crypto derivatives space. The data presented in this article is yet another reminder of the risks involved when trading these assets.
As a researcher studying the cryptocurrency market, I’ve noticed an intriguing trend emerging from the data. A significant number of short contracts in crypto derivatives have been liquidated over the last 24 hours. This comes on the heels of Bitcoin‘s price surging above $66,000.
Bitcoin Recovery Has Triggered Large Derivatives-Related Liquidations
Based on information from CoinGlass, there have been substantial liquidations in the cryptocurrency derivatives market during the past 24 hours.
As an analyst, I would explain that the term “liquidation” refers to the compulsory procedure initiated when a contract incurs significant losses. This process involves the platform’s intervention to close down the contract forcibly. Here’s a table detailing the total amount of contracts liquidated over the past day.
Over $135 million worth of cryptocurrency derivative contracts held by approximately 52,000 traders were terminated during this period.
The recent derivatives purge has had a significantly larger impact on short position holders, as over $93 million worth of their contracts were swept up in it. To put it another way, approximately 68.4% of the liquidations involved short positions. This outcome is not unexpected given that Bitcoin and other assets have posted impressive gains in the past 24 hours.
Despite the positive performance, over $42 million worth of positions remained vulnerable to liquidation. This indicates that speculators entered the market with excessive leverage as the price surge occurred. Regrettably, they joined in too late and faced liquidation once the initial price increase began to subside.
In most instances, Bitcoin contract liquidations were the primary culprits of this event, as indicated by the following heatmap.
As a researcher studying the cryptocurrency market, I’ve observed that the recent liquidations of Bitcoin amounted to an impressive $47 million, which is more than double the size of Ethereum‘s liquidations at $16 million. Interestingly enough, Solana’s liquidations were relatively similar, coming in at $12 million. This data implies that the demand for speculation around Ethereum has been remarkably subdued compared to Bitcoin and Solana in the recent past.
As a crypto investor, I’ve come across the term “squeeze” to describe a dramatic market event where a sudden price swing leads to a significant number of forced liquidations. These liquidations in turn intensify the price movement, creating a self-reinforcing cycle that can result in even more sell orders and further price declines. It’s a challenging situation for investors as it can lead to substantial losses if one is not prepared or does not have sufficient stop loss orders in place.
In the crypto market yesterday, there were significant forced buying of shorts, resulting in a substantial number of positions being closed – a phenomenon referred to as a short squeeze. It’s important to note that this occurrence is not unprecedented in the history of cryptocurrencies.
As a researcher studying the coin market, I’ve observed that coins can be rather unpredictable and subject to intense speculation. Consequently, taking on excessive leverage becomes a precarious endeavor in this domain. Thus, when volatility flares up as it did today, it’s no wonder that many traders find themselves taken aback.
Signs of impending liquidations became apparent during the recent surge in Bitcoin’s price, as indicated by an increase in Bitcoin futures Open Interest – a metric representing the number of active contracts.
Despite the recent surge, the Open Interest in the chart remains significant, implying that speculators have yet to be deterred by the squeeze.
BTC Price
At the time of writing, Bitcoin is trading at around $66,000, up 8% over the past seven days.
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2024-05-16 22:11