Data shows that the cryptocurrency derivatives market observed massive liquidations following the crash of Bitcoin and other assets.
Bitcoin saw bears gain as price plunged 6% over the past day
Recently, Bitcoin has been stuck in consolidation in the $60,000-$70,000 price range, unable to mount a sustained move in either direction. However, over the past day, the coin has seen a significant deviation from this range, and it is not in the direction that the bulls would have liked.
The chart below shows what the price action of the cryptocurrency has looked like recently.
The price of the coin has observed a plunge over the past couple of days | Source: BTCUSD on TradingView
During this latest drop, BTC briefly slipped to a low below $57,000 before experiencing a slight rebound to the current mark of $57,500. This is the lowest level since the end of February.
As is usually the case, the rest of the sector also burned alongside the original cryptocurrency, but Bitcoin’s 6% drop over the past 24 hours is deeper than that of many altcoins.
With the emergence of this new brutal price action in the market, it is not surprising that traders in the derivatives market were caught off guard by the range breakout.
Crypto derivatives market saw liquidations of over $424 million
According to data from CoinGlass, market volatility has triggered a large number of liquidations in the derivatives industry. THE “liquidation“” of a contract occurs when it accumulates losses of a certain degree and receives a forced closure from the platform it is opened with.
Here is the data regarding cryptocurrency-related liquidations that took place over the past day:
Looks like a huge amount of liquidations have occurred over the last 24 hours | Source: CoinGlass
The table shows that the cryptocurrency market as a whole suffered almost $425 million in liquidations during this period. Given that price action in the sector has been on a downward trend, it is not surprising to see long positions offsetting most of this rise.
Specifically, $354 million of these liquidations came from long contract holders, or more than 83% of the total. A mass liquidation event like today’s is commonly referred to as “squeeze“, since the latter involved an overwhelming majority of long positions, this would be called a long squeeze.
During a squeeze, a large change in price causes a large number of liquidations, which feed back into the move, amplifying it and leading to even more liquidations.
Given its position as the currency with the largest market capitalization, Bitcoin naturally took up the largest portion of individual contributions to this squeeze.
BTC appears to have seen $164 million in liquidations during the past day | Source: CoinGlass
Historically, large-scale liquidations like this have not been uncommon in the cryptocurrency market. This is because different coins can be quite volatile, so it can be difficult to bet in just one direction.
Related reading: First in history: Bitcoin miners now need more than 1 EH/s of power to mine 1 BTC
Leverage their use is also widespread in the industry, with many platforms offering easily accessible extreme multipliers. With all the risky speculation, it’s no surprise that the market shakes when price movements like today’s occur.
Featured image from Shutterstock.com, CoinGlass.com, chart from TradingView.com
