After today’s incredible Bitcoin move where the price climbed to $47.5k, shorts worth around $47 million liquidated within an hour.
$47,000,000 In Bitcoin Futures Shorts Liquidate Within Just An Hour
As pointed out by an analyst on Twitter, around $47 million in Bitcoin futures shorts have liquidated within an hour today.
If you don’t know what BTC futures trading is, basically it’s a type of trading where investors can speculate on the price of the coin without having to actually hold it. They have to put forth some minimum collateral, called the “margin,” in order to participate. Some exchanges like Binance allow cryptocurrencies themselves to be used as margin.
When an investor thinks that the price of the coin will decrease in the future, they bet on it using a futures “short.”
Those who assume a bullish outlook for Bitcoin go with a “long.” In both cases, investors make profit if the coin moves in the direction they are betting on.
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However, if BTC moves opposite to how they imagined it would, they end up taking the loss, and have to pay it using their margin.
All futures positions require a minimum amount of margin in order to remain open. During a liquidation, an exchange forcibly closes a trader’s position because of a partial or total loss of the initial margin.
Here is a chart showing the liquidations of futures short positions over the last couple of days:
BTC futures short liquidations show a sharp spike | Source: Glassnode
As you can see in the above chart, around $47 million in futures shorts were liquidated within the matter of an hour today as Bitcoin made a sharp move up.
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This shows quite a large amount of losses were incurred by these traders today. However, such liquidations aren’t uncommon in the crypto market because of its high volatility.
Regardless of the risks, many traders still use futures shorts in order to protect their positions on the spot market as whichever way the market moves, they can end up making a profit.
BTC Price
At the time of writing, Bitcoin’s price floats around $47k, up 12% in the last seven days. Over the last month, the crypto has lost 1% in value.
The below chart shows the trend in the price of the coin over the last five days:
BTC's price shoots straight up | Source: BTCUSD on TradingView
After a long period of consolidation between the $40k and $45k levels, Bitcoin has finally made a move above it. The coin’s value shot up 10% in 24 hours during this spike up where the crypto touched $47.5k.
Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com