According to data, the previous 24 hours have seen more than $400 million liquidated on the crypto futures market as Bitcoin crosses the $23k level.
Over $400 million in cryptocurrency futures were liquidated in the last day alone
A futures contract “liquidates” when losses mount and consume a certain portion of the initial margin or collateral (the precise amount depends on the derivatives exchange), forcing the exchange to terminate the position.
For a few reasons, there are frequent large-scale liquidations on the cryptocurrency market. The majority of coins (except stablecoins) are often rather volatile, and occasionally even hourly changes can be fairly large.
The availability of high levels of leverage on most exchanges is the other factor. Any futures user may borrow “leverage” as a loan amount against the margin. Numerous exchanges even provide values up to 100 times the starting position.
Leverage may greatly boost earnings if the gamble succeeds, but it can also greatly increase losses. Because of this and the volatility of even the most valuable currencies, like Bitcoin, margin trading in cryptocurrency futures may be highly dangerous.
Above, you can see that during the last 24 hours, the market for cryptocurrency futures lost close to $405 million. Approximately $133 million of these liquidations happened just in the past 12 hours.
A “squeeze” is a situation in which massive liquidations like today’s take place. The fast price shift that occurs during these occurrences forces numerous contracts to close all at once, amplifying the price movement and resulting in more liquidations.
Today’s liquidation squeeze encompassed just under 100,000 traders, and more over 50% of the closed contracts belonged to shorts.
This pattern makes sense because the majority of the liquidations would have been brought on by the sudden rise in value of currencies like Bitcoin.
At the time of writing, Bitcoin’s price is hovering at $23.1k, up 2% over the previous week. The value of the cryptocurrency has increased by 11% in the last month.
The coin’s price trend over the previous five days is seen in the chart below.