Cryptocurrency liquidations reach levels not seen for years as Bitcoin (BTC) falls back below $100,000.
Earlier today total 24-hour crypto liquidations across all exchanges reached over $1.1 billion, according to CoinGlass data. Of those, $280 million came from short positions and $815 million came from long positions.
This is the largest crypto liquidation event since December 2021, according to crypto news outlet The Block. The Bitcoin market was the one that saw the most liquidations, with over $560 million involving the world’s first cryptocurrency.
This follows Bitcoin recently breaking $100,000 for the first time. The last leg up followed United States President-elect Donald Trump announcing his pro-crypto Securities and Exchange Commission (SEC) chairman.
What does this crypto liquidation actually mean for coin owners?
Such large liquidations are often described as a “leverage flush” by market observers and are viewed as a sane cyclical occurrence, making the market more stable. Large amounts of leveraged positions in a market result in forced sellers or forced buyers during liquidations, which might significantly amplify market movements and volatility. Rachel Lucas, crypto analyst of BTC Markets told The Block:
“Market makers and large players often use these conditions to their advantage, first pushing the price above $100,000, attracting retail enthusiasm, and then reversing it sharply to liquidate leveraged positions on both sides, long and short.”
Liquidations happen when a trader takes a leveraged position that gives him exposure over 100% — positive or negative — and is forced to close the position because the trade ended up costing them their entire collateral. Lucas added:
“Retail traders’ excessive leverage during Bitcoin’s all-time high exacerbated this situation. […] Many succumbed to FOMO (fear of missing out), taking long positions at elevated levels, while larger holders (whales) strategically offloaded their assets.”
Market data shows that Bitcoin is trading at about $99,320 at the time of writing. Over the last 24 hours, the coin lost 2.63% of its value and over the last seven days it gained just under 1.5%.
The Crypto Fear & Greed Index, a multifactorial measure of crypto market sentiment, currently indicates a level described as “extreme greed.” The index stands at 72, indicating that the crypto market is now overrun by greed. With such scores, the instrument warns of a possible imminent correction:
“When Investors are getting too greedy, that means the market is due for a correction.”
