Crypto shorts see a $240 million flush as Bitcoin bounces back above $30,000

The crypto futures market took a $380 million hit in the past day as bitcoin rallied above $30,000, data showed. Of this, $240 million in liquidations belonged to short traders.

Crypto Shorts Liquidated $240M in Last 24 Hours

In case anyone doesn’t know”liquidateYes, it is best to start with a brief overview of how margin trading in the crypto futures market works.

For example, when an investor opens a long or short Bitcoin contract on a derivatives exchange, they first have to put up some collateral called “margin.” This margin can be in BTC, any other coin, or even fiat currency.

For this margin, investors can choose to assume “Leverage,” The amount lent is often many times the initial position.

The advantage of leverage is that if the price moves in the direction the contract is betting on, the profit is now many times greater than it is now.

Related reading | Bitcoin carnage awakens sleeping giant as spot volume surges

However, it is also true that any losses incurred will also be more. When such losses deplete a specific portion of the margin, exchanges force liquidate Bitcoin positions.

This is liquidation. The table below shows the liquidation data for the cryptocurrency market over the past day.

Looks like liquidations in the futures market have amounted to about $380M In Last 24 Hours | Source: CoinGlass

As you can see above, the crypto market has suffered some heavy liquidations over the past day, with $184 million inflows in the past 12 hours alone.

Most of the liquidation came from short traders, which makes sense as coins like Bitcoin are seeing a sharp price rally today.

Bitcoin and Crypto Shorts

Around 63% of the liquidations have involved shorts | Source: CoinGlass

Judging by the above data, it appears that more than $240 million in liquidations took short traders by surprise.

Related reading | Bitcoin crashed 20% in 5 days. Why is now the prime time to enter the crypto market?

Mass liquidations like today’s are not uncommon in the crypto market. There are several reasons behind this.

The first is the high volatility of the coin. Even the largest coins like Bitcoin and Ethereum can observe considerable volatility over a short period of time.

Another factor contributing to this is that many derivatives exchanges offer leverage as high as 100x.

Uninformed traders taking such large positions in a volatile market like cryptocurrencies greatly increase the risk of liquidation.

bitcoin price

As of this writing, price of bitcoin Floating around $30.50, it’s down 15% over the past week.

Bitcoin Price Chart

The price of the coin seems to have already observed a rebound from the crash | Source: BTCUSD on TradingView
Featured image from Unsplash.com, chart from TradingView.com

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