Another $438M In Crypto Longs Gone As Bitcoin, Altcoins Pull Back

Overview

Recent market volatility has led to significant liquidations in the cryptocurrency derivatives market, with a notable amount affecting long positions. As Bitcoin and various altcoins experienced a price retracement, liquidations surpassed $500 million within a single day.

Market Liquidations

According to data from CoinGlass, the cryptocurrency derivatives exchanges have faced a substantial wave of liquidations, totaling approximately $507 million over the past 24 hours. The term “liquidation” refers to the forced closure of open contracts that have incurred losses beyond a specific threshold set by the exchange. This phenomenon often occurs during periods of rapid price movements, which can catch many contracts off guard simultaneously.

In this recent instance, a significant portion of the liquidations—about $438 million, or 86%—pertained to long contracts. This predominance is attributed to the sharp downward movement in asset prices during this timeframe. Bitcoin, for instance, experienced a decline from a peak price to a much lower value within just a few hours, triggering these liquidations.

The data reveals that Bitcoin was the primary contributor to this derivatives flush, with $233 million in contracts liquidated. Alongside Bitcoin, other assets also faced liquidations, although to a lesser extent. Short investors also faced losses, with $69 million in short positions liquidated during the same period.

In addition to the immediate effects of the liquidations, on-chain analytics firm Santiment reported a decline in Bitcoin Open Interest. This indicator measures the total value of open positions related to Bitcoin on all derivatives exchanges. Following the recent liquidations, Bitcoin Open Interest fell to $19.5 billion, which is significantly lower than its January peak of $38.3 billion. This decrease signifies a combination of forced liquidations and a general pullback from risk by investors.

Furthermore, Santiment noted a rise in Negative Sentiment, a metric that gauged the level of bearish sentiment surrounding Bitcoin on major social media platforms. This increase in negativity coincided with the price drop, reaching a two-week high and indicating heightened fear, uncertainty, and doubt (FUD) among retail investors.

From author

The recent liquidations in the cryptocurrency market underscore the inherent risks associated with trading on margin and the volatility that can arise during rapid price fluctuations. The overwhelming majority of long contract liquidations reflects a market sentiment that may be shifting as investors react to price changes. The decline in Bitcoin Open Interest further emphasizes a cautious approach from traders, suggesting a reevaluation of risk tolerance in light of recent events.

Impact on the crypto market

• Significant liquidations exceeding $500 million highlight the volatility and risks present in the cryptocurrency derivatives market.
• The majority of liquidations involved long positions, indicating a potential shift in market sentiment.
• The decline in Bitcoin Open Interest may suggest that traders are becoming more risk-averse following recent price movements.
• Increased bearish sentiment on social media platforms could impact retail investor confidence in Bitcoin.
• Overall market dynamics may continue to be influenced by the interplay of liquidations and investor sentiment in the near term.