Data shows more than $170 million in Bitcoin futures has liquidated over the past 24 hours as the price of the crypto makes sharp recovery above $38k.
Following the commencement of the Russian invasion of Ukraine yesterday, the price of Bitcoin took a deep plunge down as investors pulled out of the market. During this crash, the coin’s value went as low as $34.4k.
However, today the value of the crypto already seems to have made some sharp recovery as the price hit $39k earlier in the day.
At the time of writing, Bitcoin’s price floats around $38.8k, down 4% in the last seven days. Over the past month, the crypto has gained 7% in value.
The below chart shows the trend in the price of BTC over the last five days.
BTC's price has made some sharp recovery today | Source: BTCUSD on TradingView
Due to this sharp price rise, there have been some mass liquidations in the futures market. In case someone isn’t familiar with what a “liquidation” is, it’s best to get a quick overview of margin trading first.
As you may know, when investors purchase a buy or sell futures contract on a derivatives exchange, they have to put forth some initial investment, called the “margin.”
Against this margin, users can loan Bitcoin amounts many times their actual position. This is called making use of “leverage.” Any profit that investors earn on this leverage is theirs to keep.
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However, if the price of the coin moves opposite to the direction they bet on, then their losses are also as many times more in magnitude as the leverage. After the user loses a large percentage of their margin because of these losses, the exchange forcibly closes the position. This is precisely what a “liquidation” is.
Now, here is the latest data regarding the Bitcoin futures liquidations:
Looks like the futures market has observed some mass liquidations over the past day | Source: CoinGlass
As you can see above, more than $170 million in Bitcoin futures contracts have been liquidated over the past 24 hours.
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Since these liquidations took place because of a sharp price move up, the majority of these are from short contracts.
While this is a sharp and unexpected recovery for the crypto, it’s unclear how long it will last. The macro fears and uncertainties due to the Russia-Ukraine war are still abound at large as the invasion still rages on.
Featured image from Unsplash.com, chart from TradingView.com