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The cryptocurrency derivatives market has faced significant challenges due to the recent continuation of bearish trends in Bitcoin and other currencies, resulting in widespread liquidations across exchanges.
Crypto Liquidations Approaching $1 Billion in the Past 24 Hours
As per data provided by CoinGlass, there has been a substantial number of liquidations within the cryptocurrency derivatives market over the last day. A “liquidation” happens when an open contract hits a loss threshold established by the exchange, leading to its forced closure.
Given the volatility experienced by Bitcoin and other assets in the last 24 hours, many contracts have crossed this critical threshold. Below is a table that outlines key figures related to these liquidations.
As illustrated, the total cryptocurrency liquidations have reached $967 million during this period, which is quite substantial. Given the predominantly bearish price movements over the past day, bullish positions have borne the brunt of the impact. Indeed, data reveals that $849 million, or nearly 88% of the total liquidations, involved long investors.
Ethereum has been at the forefront of speculative activity recently, leading the charts in this derivatives liquidation event with $309 million liquidated. Bitcoin follows closely with approximately $246 million.
Incidents of mass liquidation, such as the one witnessed now, are not uncommon in the cryptocurrency landscape, primarily due to two factors: the inherent volatility of coins and the easy access to high leverage. Events involving a chain reaction of liquidations are referred to as squeezes.
In this recent event, where long positions were most adversely affected, it is classified as a long squeeze. This marks the second long squeeze experienced in the market this week, the first occurring during Bitcoin’s drop to $112,000 on Monday.
Here’s a chart from on-chain analytics firm Glassnode that compares the previous long squeeze with the latest one for Bitcoin:
According to Glassnode, these significant long squeezes might actually help mitigate the risk of future events. “This flush of leverage indicates a widespread deleveraging process, often resetting market positioning and reducing the chances of further cascades,” elaborates the analytics firm.
It remains uncertain whether these liquidations will provide stability to the market or if Bitcoin and other assets will continue to face heightened volatility.
Bitcoin Price
At the moment, Bitcoin is trading at approximately $109,200, reflecting a decline of more than 6% over the past week.
