• 93 million bitcoin shorts were wiped out in 1 hour
• Liquidations occur when a derivative exchange has to forcibly close a contract due to a percentage of margin being lost
• High leverage and volatility in the crypto futures market results in large liquidations taking place
As Bitcoin continues to rise above the $19,000 mark, data reveals an unusually high amount of shorts being liquidated in the Bitcoin futures market. The on-chain analytics firm Glassnode reported that approximately $93 million worth of shorts were wiped out within the span of an hour.
Liquidations occur when a derivative exchange has to close up a contract on the Bitcoin futures market due to a certain percentage of the margin being lost. The margin is the collateral amount put up in order to open the position, and when the BTC price moves in the opposite direction to what the investor bet on, the margin is lost.
The crypto futures market is an incredibly volatile environment, and many derivative exchanges offer high leverage of up to 100x in the original position. The combination of high leverage and volatility results in a large risk of positions being liquidated. This is why the “total futures liquidations” metric is an important indicator to monitor, as it tracks the total amount of both short and long liquidations happening in the Bitcoin futures market currently.
The value of this metric has been growing in recent months, and it has spiked significantly in the past day as Bitcoin pushes above $19,000. This indicates that more shorts have been liquidated in the Bitcoin futures market as the price increases, and that investors are taking a greater risk to bet on the direction of the coin.
It remains to be seen whether the liquidations will continue to increase as Bitcoin continues to rise, and whether this will have any significant effect on the overall health of the market. For now, it appears that investors are taking a calculated risk by betting on the direction of the coin, and they will have to wait and see if their bets pay off.