Bitcoin has dropped a little lower and dipped lower again today (it is now down over 2,000 at $7,947.06). In the last 24 hours over $185 million in bitcoin shorts have been liquidated, which is likely to cause some minor price volatility. At this time it seems like the alt-coin revolution is not quite as impressive as the early-2017 sell-off would suggest, but it is still early in the year and the buzz is still very strong. With the SEC sending mixed messages on the futures markets, investors are going to be looking very closely at any “ifs” and “buts” that come from Washington.
The most popular and valuable cryptocurrency in the world is a whopper. Bitcoin, which has become a global phenomenon, fell by $2,000 within hours of its fifth consecutive daily loss. The price of bitcoin, which is the top cryptocurrency by market cap, fell to as low as $6,282, its lowest level since last August. Bitcoin Price Chart (Bitcoin to USD)
Bitcoin dropped nearly $2,000 this morning, liquidating $200 million in futures positions over the past 12 hours and causing most of the cryptocurrency market to collapse.
Liquidation, for the uninitiated, occurs when leveraged positions are automatically closed by exchanges/brokers as a protective mechanism. Futures and margin traders, who borrow capital from the exchanges (usually in varying amounts) to make large bets, post a small amount of collateral before making a trade.
As the spot market declines, so do the futures positions, leading to predetermined levels of liquidation which vary according to the leverage used and the initial capital. This creates a kind of cascade effect that leads to a sudden and sharp drop… and unpleasant consequences.
Bitcoin rekta everything else?
Just this morning, $185 million in long positions in cryptocurrencies were liquidated as bitcoin fell several thousand dollars, while $14 million in short positions were liquidated. Long traders bet on rising asset prices and exit when prices fall; short traders, on the other hand, bet on falling prices and exit when prices rise.
Of that $185 million, $122 million came from bitcoin positions alone. Ethereum positions lost over $44 million and XRP positions lost $12 million.
More than $90 million was liquidated in the Bybit futures market alone. The OKEx exchange was second on the list with $48 million, while Binance traders suffered losses of $37 million.
Meanwhile, bitcoin continues to fluctuate in a narrow price range. In recent weeks, the asset has traded (mostly) between the $30,000 and $37,000 levels, showing no signs of a clear breakout.
Image: BTC/USD via TradingView.
Despite the lack of price movement, millions of dollars continue to be liquidated. I wonder what it shows.
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