As the Bitcoin price crashes to $41k today, the crypto futures market has observed more than $323 million in liquidations over the past 24 hours.
More Than $323 Million In Crypto Futures Liquidate Over The Past Day
In case anyone isn’t aware of what futures “liquidations” are, it’s best to take a brief look at the workings of margin trading.
When an investor takes on a crypto futures contract, they have to first put forth a collateral, called the “margin.” This margin can be in any crypto or in fiat.
Against the margin, futures holders can decide to loan an amount multiple times their initial investment. This is called the “leverage.”
The benefit of taking leverage is that if the price of the crypto moves in the direction the holder has bet on, any profits earned will be multitudes more.
However, it also leads to much greater risk as any losses incurred will also be multiplied by the same amount as the leverage.
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When a specific amount of the margin is lost to losses, the derivatives exchange forcefully closes the position. This is precisely what a liquidation is.
Now, here is the latest data for liquidations in the entire crypto market over the past day:
There seem to have been a large amount of liquidations today | Source: coinglass
As you can see above, total liquidations in the crypto futures market has amounted to more than $323 million over the last 24 hours.
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In the past twelve hours, there has been around $217 million in liquidations, but almost $170 million of this was liquidated in the last four hours alone.
For Bitcoin specifically, total amount of liquidations has measured close to $90 million in the last day.
Bitcoin futures liquidation data over the past day | Source: coinglass
Here as well more than half the total liquidations have arrived in the last four hours alone as the price has taken a plunge to $41k.
Such large liquidations aren’t uncommon to see in the crypto sector due to the high volatility of the coins. There is also the fact that many derivatives exchanges offer even up to 100x in leverage, which significantly increases risks.
At the time of writing, Bitcoin’s price floats around $41k, down 11% in the last seven days. Over the past month, the crypto has gained 5% in value.
The below chart shows the trend in the price of the coin over the last five days.
Looks like the price of Bitcoin has taken a severe beating over the last twenty-four hours | Source: BTCUSD on TradingView
Featured image from Unsplash.com, chart from TradingView.com