Data shows that the cryptocurrency futures market has seen huge sell-offs in the past day as bitcoin recorded a sharp rise towards $28,000.
crypto Futures observed $78 million in liquidations in the last 24 hours
A cryptocurrency futures contract is said to be “settled” when the derivatives exchange that the contract is open with forcibly closes it. This happens when the contract has accumulated losses of a certain percentage, the exact value of which may differ between platforms.
In this sector, it is not unusual to see an avalanche of such liquidations in a short period of time. The reason behind this is the high volatility that most assets show on average.
Many investors also like to play with extreme amounts of leverage, because it is easily accessible on many platforms. Leverage alone can increase liquidation risk many times over, so combined with high volatility, it can make it easier to liquidate contracts.
Over the past day, the cryptocurrency market once again experienced notable volatility, leading to another sell-off event on the futures side, as the following data from CoinGlass shows.
<img decoding="async" class="alignnone wp-image-555564 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Crypto-Shorts-See-Killing-as-Bitcoin-Rises-Towards-28000.png" alt="Cryptocurrency and bitcoin Settlements” width=”559″ height=”262″ srcset=”https://technicalterrence.com/wp-content/uploads/2023/10/Crypto-Shorts-See-Killing-as-Bitcoin-Rises-Towards-28000.png 559w, https://www.newsbtc.com/wp-content/uploads/2023/10/data.png?w=460 460w” sizes=”(max-width: 559px) 100vw, 559px” loading=”lazy” data-recalc-dims=”1″/>
Looks like the market has seen some high liquidations in the past day | Source: CoinGlass
As can be seen from the chart, the crypto market as a whole has seen liquidations of over $78 million in the last 24 hours. Of them, $61.88 million corresponded to short contracts, equivalent to almost 80% of the total.
Naturally, this makes sense, as this latest liquidation restriction has been led by a rally in the price of bitcoin.
<img decoding="async" class="aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/Crypto-Shorts-See-Killing-as-Bitcoin-Rises-Towards-28000" alt="bitcoin cryptocurrency price chart” width=”1534″ height=”869″ loading=”lazy”/>
The value of the asset has shot up today | Source: BTCUSD on TradingView
As shown above, bitcoin has enjoyed a sharp rise over the past day. At the peak of this rally, the coin had retested the $28,000 level but has since seen a small pullback.
The rest of the sector also followed the original cryptocurrency in this rally (as is often the case), which is why shorts across the sector have taken a beating today. The following table shows what the individual contribution to this liquidation crisis has been for the different symbols of the sector.<img decoding="async" loading="lazy" class="aligncenter wp-image-555568 size-large" src="https://technicalterrence.com/wp-content/uploads/2023/10/1697469137_893_Crypto-Shorts-See-Killing-as-Bitcoin-Rises-Towards-28000.png" alt="bitcoin, crypto shorts” width=”790″ height=”358″ srcset=”https://technicalterrence.com/wp-content/uploads/2023/10/1697469137_893_Crypto-Shorts-See-Killing-as-Bitcoin-Rises-Towards-28000.png 790w, https://www.newsbtc.com/wp-content/uploads/2023/10/table.png?w=460 460w, https://www.newsbtc.com/wp-content/uploads/2023/10/table.png?w=768 768w, https://www.newsbtc.com/wp-content/uploads/2023/10/table.png?w=750 750w” sizes=”(max-width: 790px) 100vw, 790px” data-recalc-dims=”1″/>
The breakdown of the liquidations by asset | Source: CoinGlass
Unsurprisingly, bitcoin takes up the lion’s share of liquidations with $31.5 million, while ethereum comes in second place with $13.06 million. Interestingly, Loom Network (LOOM) is third on this list, despite the asset being the 71st largest in the sector by market capitalization.
The altcoin has enjoyed a strong rally of over 113% in the last week, which is perhaps why the cryptocurrency has seen such strong interest in the futures market.
bitcoin open interest has recovered since the squeeze
As a CryptoQuant analyst market day As he noted, bitcoin open interest, a measure of the total number of contracts associated with the asset currently open in the futures market, has retreated since the sell-off occurred.
<img decoding="async" loading="lazy" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/10/1697469138_956_Crypto-Shorts-See-Killing-as-Bitcoin-Rises-Towards-28000.png" alt="bitcoin Open Interest” width=”2556″ height=”1996″/>
The metric has climbed back up from its lows | Source: @JA_Maartun on X
It would appear that more speculators have jumped into the market even after seeing a large number of traders liquidate. In general, high open interest can lead to volatility, so the indicator returning to its pre-crash levels could mean that btc would soon see steeper price action in the near future.
Featured image from Shutterstock.com, charts from TradingView.com
