The bitcoin (BTC) crash of the past few days has caused a major bloodbath among traders. In total, more than $1 billion in positions have been liquidated in the past 24 hours. This is evident from data from coin glass†
Trading crypto with leverage
Trading with a margin allows traders to trade with leverage. This means that one can trade with a larger position by betting borrowed money. For example, think of a leverage of 5x; when you invest with $100 your position with this leverage is $500. Should the price rise, the profits would of course be greater compared to if you invested with $100. One can also short go if one expects declines.
However, trading with leverage is extremely risky. Price swings, such as those of recent days, can have a huge impact when you trade with leverage. If your needed margin are no longer sufficient to enter into the trade, an exchange such as FTX can close your position. This is to prevent you as a trader from going down the drain.
$1.1 billion in futures positions liquidated
And that is exactly what happened on a large scale yesterday. Because a large group of traders apparently expected bitcoin and other prices to make a bounce, but this bounce failed to materialize, their positions have been closed. This involves a total of no less than $1.1 billion in positions!
Most of the liquidations took place on the Okex exchange. There, $313 million in positions were liquidated, of which 81% lung ie positions of traders expecting an increase. Binance and FTX were also hurt, with $269 million and $175 million in liquidations, respectively. There too, the vast majority were long.
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