In an exciting 24 hours, Bitcoin (BTC) and virtually the entire crypto market have suffered a remarkable decline. Crypto traders in particular had a tough time, experiencing nearly half a billion dollars worth of liquidations. This evaporation followed the recent drop in Bitcoin price to below $66,000.
Volatility leads to massive BTC liquidations
According to CoinGlass, the derivatives market in the crypto space is particularly affected by these price fluctuations. In this context, liquidation occurs when an open leveraged position becomes so negative that the exchange where the trader is a customer is obliged to close the contract. This will result in the loss of the trader’s entire stake on the position in question.
In the last 24 hours, more than 100,000 traders on various crypto exchanges were liquidated for a total of $455 million. Not entirely surprisingly, the peak of these liquidations came after the BTC price suffered a significant decline. Long positions in particular were liquidated; 80% of all liquidations affect this group of traders who are betting on a price increase.
A look into the future of Bitcoin
Of course, not only Bitcoin fell today, Ethereum (ETH) and altcoins such as Solana (SOL) and Dogecoin (DOGE) also followed this downward trend, resulting in more than $100 million in liquidations. The number of liquidations today is well above average and shows that this is a fairly strong correction. Many traders appeared to be unprepared for a decline.
When the first wave of liquidations begins, there is always a chance that this will lead to further downward price pressure. This further bearish price pressure can then lead to even more liquidations, creating something of a vicious circle. We call this a liquidation waterfall. Today you could see a small waterfall.
The large amount of money that has evaporated from crypto traders today shows once again that trading crypto is not without risk. Almost always, large price movements, both up and down, result in numerous liquidations.