Levered bullish longs getting liquidated as Bitcoin market softens
|On-chain data shows that traders' bullish long positions on bitcoin are being liquidated as the cryptocurrency struggles to gather traction above $30,000.
Data from CoinGlass shows that $85.68 million in long positions were liquidated in the last 24 hours, making up the majority of the $116.38 million in positions ‘rekt’ as the crypto market softens.
Long/short liquidations in bitcoin (CoinGlass)
CoinGlass data also suggests that a significant number of liquidated traders had high-leveraged positions, with many that held positions between the $30,200 and $30,500 range.
Futures trading involves the use of leverage, meaning traders can take large long/short position by depositing a relatively small amount of money, called a margin, with the exchange providing the rest of the value. That exposes futures traders to liquidations – forced closure of long/short positions due to margin shortages often caused by the market moving against the direction of the levered bet.
The use of leverage has been creeping back into the market after hitting a low at the end of April. The higher the degree of leverage in the market, the greater the probability of wild price swings.
CryptoQuant's estimated leverage ratio (CryptoQuant)
CryptoQuant’s estimated leverage ratio for bitcoin has risen from 0.19 at the end of April to 0.25 currently. It could rise further, as the recent bitcoin spot-ETF filings by BlackRock and other traditional finance heavyweights has revived bullish sentiment in the crypto market.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.