The price of Bitcoin (BTC) has dropped significantly after hitting several records, leading to numerous liquidations in the crypto market. In just 24 hours, we recorded over half a billion liquidations, affecting nearly 200,000 traders.
A wave of BTC liquidations
The cryptocurrency market cap fell sharply by 7.3% today to a low of $2.68 trillion, representing an outflow of around $175 billion from the market. The decline also hit traders hard, especially traders with a long position.
Liquidations occur when traders trade with leverage and their position gets too far underwater. The respective trading platform then automatically closes the trader’s position to prevent further losses. As a result, the trader loses his entire share in the event of a liquidation.
80% of liquidations today were long positions. This is not surprising as the price has fallen sharply and these traders are actually betting on the price to rise. Short positions were also liquidated, but on a much smaller scale, totaling $136.5 million, according to CoinGlass data.
The BTC price corrected
The recent price movements can be attributed to several factors. Firstly, there is that reduced inflow in Bitcoin ETFs, indicating a possible decline in interest from institutional investors. Total inflows into spot Bitcoin ETFs were just $133 million on March 14, the lowest level this month. This drop in interest could be a harbinger of a broader market correction.
In addition, the recent release of economic data in the USA plays a role. In particular, producer price index (PPI) and consumer price index (CPI) data came in higher than expected, leading to speculation about continued high interest rates from the Federal Reserve. These economic signals may have heightened concerns about the U.S. economy and made investors more cautious.
A correction in the BTC price is not surprising in this context. In addition, we have also seen a constantly rising price recently and the market is quite overheated. A decline that cools the market a bit is therefore not so bad.