Data shows that the crypto derivatives market is experiencing mass liquidations as the price of Bitcoin exceeds $71,000.
Crypto derivatives experienced $223 million in liquidations in the past 24 hours
Liquidations have piled up in the crypto derivatives market over the past day, according to data from CoinGlass. “Liquidation” here refers to the forced termination of an open contract after it has accumulated a certain amount of losses (the exact percentage may vary depending on the platform).
There are two main factors that increase the likelihood of a contract being liquidated: volatility and leverage. In the cryptocurrency sector, mass liquidation events can occur regularly as investors tend to use leverage freely and the prices of various coins tend to exhibit frequent and wild price movements.
In the past 24 hours, the market witnessed volatility once again and, as expected, derivatives flashes occurred again. The table below shows the numbers associated with these recent liquidations.
It appears that a large number of liquidations have occurred in the past day | Source: Coinglass
As you can see, the entire crypto derivatives market saw a total of $223 million liquidated during this period. Of this, more than $165 million of flash includes short positions.
This means that these investors who bet on a bearish outcome contributed to nearly three-quarters of the squeeze. The reason behind this is, of course, the bullish boost this sector has enjoyed with Bitcoin’s rally above $71,000.
In terms of individual symbols, the top two coins by market capitalization, Bitcoin and Ethereum (ETH), contributed the most to the event with $85 million and $38 million in liquidations, respectively.
Latest liquidation distribution by issue | Source: Coinglass
Among the rest, Solana (SOL) and Dogecoin (DOGE) recorded the biggest flushes with $16 million and $14 million in liquidations, respectively. Although DOGE’s market capitalization is almost a quarter of SOL’s, the memecoin has seen a significant 13% increase, which may explain why the company was able to manage liquidations of almost the same amount. .
Regarding whales, the past day’s liquidation squeeze was notable in magnitude, but the trend in the market cap to open interest ratio suggests we may continue to see flashes in the sector.
“Open interest” here refers to the total amount of Bitcoin-related positions currently open on all derivatives exchanges. As analysts pointed out in a CryptoQuant Quicktake post, BTC’s market cap to open interest ratio has been in dangerous territory recently.
The value of the metric seems to have been on a downward trend for some time. Source: CryptoQuant
A low value for this indicator means that open interest is large relative to market capitalization, which may suggest that the market is likely to overheat. Therefore, we may see further mass liquidation events in Bitcoin in the near future to clear out accumulated excess positions.
BTC price
As of this writing, Bitcoin is trading around $71,300, up over 7% over the past week.
The price of the coin seems to be increasing recently | Source: BTCUSDT on TradingView
Featured images from Dall-E, CryptoQuant.com, CoinGlass.com, charts from TradingView.com
