Data shows the cryptocurrency derivatives sector has seen a mass liquidation event prior to now day as Bitcoin and other assets have crashed.

Crypto Market Has Seen A Long Squeeze In The Last 24 Hours

Based on data from CoinGlass, a considerable amount of contracts have been liquidated in the course of the past day. A position is alleged to be “liquidated” when its platform decides to forcibly shut it down. The exchange does this when the holder has amassed losses exceeding a certain threshold.

There are two aspects that may raise the probabilities of liquidation. The primary one is volatility. A highly volatile asset can find yourself fluctuating each ways a lot that it may possibly be hard to bet on a direction.

Volatility isn’t within the user’s hand, however the second factor, leverage, is. “Leverage” refers to a loan amount that any investor can opt to take up against their initial collateral. Leverage can mean that the profits earned by the holder change into multitudes more, but the identical also applies to the losses, so the danger of liquidation naturally rises.

Within the cryptocurrency market, each of those aspects are generally all the time present, as coins often display wild swings inside short windows and there may be an abundance of speculators willing to bet high.

The results of these conditions is that mass liquidation events, popularly called squeezes, occur on the regular. One such event has taken place within the last 24 hours, because the below table shows.

Looks just like the liquidations have heavily tended towards long contracts in this era | Source: CoinGlass

As is visible, cryptocurrency-related liquidations have totaled as much as a whopping $904 million in the course of the past day. Out of those, $811 million of the flush, representing almost 90% of the full, involved the long contract holders alone.

The rationale behind the liquidations leaning so heavily towards the traders betting on a bullish final result naturally lies within the undeniable fact that Bitcoin and other assets have witnessed a crash on this window.

Here’s a heatmap that shows how the liquidations have looked when divided by symbol:

The distribution of the liquidations by symbol | Source: CoinGlass

As displayed above, Bitcoin has contributed to the most important share of the liquidations at $261 million. Ethereum (ETH) has come second at $113 million and Solana (SOL) third at $39 million.

XRP (XRP) is larger in market cap than SOL, but has still performed worse on this metric, potentially due to undeniable fact that the latter has seen a bigger price drawdown.

Interestingly, while a protracted squeeze has occurred within the sector, the exchanges have actually not been too long-heavy when it comes to positions recently, because the analytics firm Glassnode has identified in an X post.

The trend within the futures funding rate for the highest five cryptocurrencies | Source: Glassnode on X

“The hourly funding rates for the highest 5 assets out there ( $BTC, $ETH, $SOL, $XRP, $DOGE) show the appetite for long positions has not returned to the degrees seen within the November to early December rally,” notes Glassnode.

BTC Price

On the time of writing, Bitcoin is trading at around $100,400, down over 4% within the last seven days.

The worth of the coin seems to have plunged over the past day | Source: BTCUSDT on TradingView

Featured image from Dall-E, CoinGlass.com, Glassnode.com, chart from TradingView.com