Data shows the cryptocurrency derivatives market has suffered a high amount of liquidations as the Bitcoin price has breached $71,000.
Crypto Derivatives Has Seen $223 Million In Liquidations During Last 24 Hours
According to data from CoinGlass, liquidations have piled up on the cryptocurrency derivatives market over the past day. “Liquidation” here refers to the forceful closure that any open contract undergoes after it has amassed losses of a certain degree (the exact percentage of which can differ between platforms).
There are two main factors that raise the possibility of a contract being liquidated: volatility and leverage. In the cryptocurrency sector, investors tend to freely make use of leverage and the prices of the various coins tend to show sharp price action often, so mass liquidation events can be regular occurrences.
During the last 24 hours, the market has once again witnessed volatility, which has predictably triggered another derivatives flush. Below is a table that shows the relevant numbers related to these latest liquidations.
Looks like a large amount of liquidations have occurred in the past day | Source: CoinGlass
As is visible, the cryptocurrency derivatives market as a whole has seen a total of $223 million in liquidations inside this window. Out of these, over $165 million of the flush has involved short positions.
This means that these investors betting on a bearish outcome have contributed to nearly three-fourths of the squeeze. The reason behind this is naturally the bullish push that the sector has enjoyed led by Bitcoin’s run beyond $71,000.
In terms of the individual symbols, Bitcoin and Ethereum (ETH), the top two coins by market cap, have contributed the most to the event with $85 million and $38 million in liquidations, respectively.
The distribution of the latest liquidations by symbol | Source: CoinGlass
Out of the rest, Solana (SOL) and Dogecoin (DOGE) have seen the largest flush with $16 million and $14 million in liquidations, respectively. DOGE’s market cap is almost one-fourth of SOL’s, but the memecoin has seen a much larger jump of 13%, which could explain why it has managed liquidations of nearly the same amount.
On the whale, the liquidation squeeze during the past day was of a notable size, but it’s possible that the sector could continue to see a flush, going by the trend in the market cap to open interest ratio.
The “open interest” here refers to a measure of the total amount of Bitcoin-related positions that are currently open on all derivatives exchanges. As an analyst has pointed out in a CryptoQuant Quicktake post, the ratio between BTC’s market cap and open interest has been in a dangerous territory recently.
The value of the metric appears to have been heading down since a while now | Source: CryptoQuant
When this indicator has a low value, it means the open interest is large compared to the market cap, which can imply potential overheated conditions for the market. Thus, it’s possible that Bitcoin could see more mass liquidation events in the near future, to clear out the excess positions that have piled up.
BTC Price
At the time of writing, Bitcoin is trading around $71,300, up more than 7% over the past week.
The price of the coin appears to have been on the rise recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, CoinGlass.com, chart from TradingView.com
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