Crypto Suffers Nearly $1 Billion In Liquidations As Bitcoin Extends Decline

The cryptocurrency derivatives market has been hit hard by the latest bearish continuation in Bitcoin and others as mass liquidations have hit exchanges.

According to data from CoinGlass, a massive amount of liquidations have occurred in the cryptocurrency derivatives market during the past day. A “liquidation” occurs when an open contract exceeds a certain loss threshold defined by the exchange and undergoes forceful closure.

Due to the volatility that Bitcoin and other assets have experienced over the last 24 hours, a huge amount of contracts have crossed this threshold. Below is a table that breaks down the relevant numbers related to these liquidations.

As is visible, cryptocurrency liquidations have totaled at $967 million inside this window, which is a pretty significant amount. Since the price action in the past day has majorly been in the bearish direction, the positions most affected would be the bullish bets. And indeed, as the data shows, $849 million of the liquidations, representing almost 88% of the total, involved long investors.

Ethereum has recently been dominating speculative activity in the market, and it seems the asset has topped the charts during this derivatives flush as well, with $309 million in liquidations. Bitcoin has come second with around $246 million.

A mass liquidation event like this latest one isn’t a rare occurrence in the cryptocurrency sector, mainly due to two reasons: coins can be volatile on the regular and extreme amounts of leverage can be easily accessible. Such an event, where a cascade of liquidations occurs, is known as a squeeze.

As longs were the party most seriously affected in the latest squeeze, the event would be termed as a long squeeze. This is the second long squeeze that the market has suffered this week, with the other one arriving during Bitcoin’s Monday plummet to $112,000.

Here is a chart shared by on-chain analytics firm Glassnode that shows how the previous long squeeze compared against this latest one for Bitcoin:

According to Glassnode, the two large long squeezes could actually help prevent more such events in the near future. “This flush of leverage reflects a broad deleveraging event, often resetting market positioning and easing the risk of further cascades,” explains the analytics firm.

It now remains to be seen whether the liquidations will be enough to bring a calm to the market, or if there is more volatility ahead for Bitcoin and others.

At the time of writing, Bitcoin is trading around $109,200, down more than 6% over the last week.