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Crypto Bulls Take $354 Million Scam as Bitcoin Drops to $57,000
Data shows that the cryptocurrency derivatives market has seen mass liquidations following the decline of Bitcoin and other assets.
Bitcoin saw the bears win as the price plunged 6% in the last day
Recently, Bitcoin has been stuck in consolidation in the $60,000 to $70,000 price range, unable to mount any sustained movement in either direction. During the past day, however, the currency has moved significantly away from this range and is not in the direction bulls would like.
The chart below shows what the cryptocurrency’s price movement has been 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 fell to a low of $57,000 before seeing a small recovery to the current $57,500 mark. This is the lowest level the asset has reached since the end of February.
As is usually the case, the rest of the sector also burned along with the original cryptocurrency, but Bitcoin’s 6% drop in the last 24 hours is deeper than that of many altcoins.
With the emergence of this new sharp price action in the market, it is not surprising that traders in the derivatives market were caught off guard by the breakout of the range.
Crypto Derivatives Market Saw Liquidations of Over $424 Million
According to data from CoinGlass, market volatility triggered a high number of liquidations on the derivatives side of the sector. O “sale off”of a contract occurs when it accumulates losses of a certain degree and receives forced closure from the platform with which it is open.
Here is data on cryptocurrency-related settlements that occurred during the previous 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 nearly $425 million in liquidations during this period. Given that price action across the sector has been negative, it is not surprising to see that long positions offset most of this flow.
More specifically, $354 million of these settlements came from long contract holders, representing more than 83% of the total. A mass liquidation event like today’s is popularly known as “squeeze”, since the latter involved the overwhelming majority of the longs, it would be called a long squeeze.
During a crisis, a sharp fluctuation in price causes a large number of liquidations, which feed back into the movement, amplifying it and resulting in even more liquidations.
Given its position as the currency with the largest market capitalization, Bitcoin naturally took up the lion’s share of individual contributions to this compression.
BTC appears to have seen $164 million in liquidations during the past day | Source: CoinGlass
Historically, large-scale liquidations like this have not been rare in the cryptocurrency market. This is because the various currencies can be quite volatile, so it can be difficult to bet in any direction.
Related Reading: First in history: Bitcoin miners now need more than 1 EH/s of energy to mine 1 BTC
To enjoy usage is also widespread in the industry, with many platforms offering easily accessible extreme multipliers. With all the risky speculation, it’s not surprising that the market trembles when price moves like today’s occur.
Featured image from Shutterstock.com, CoinGlass.com, chart from TradingView.com