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Blood bath: Over $1 billion was liquidated in the crypto market

Blood bath: Over $1 billion was liquidated in the crypto market

After weeks in a row of low volatility for cryptocurrencies, August 17 closed the day with a scary red candle, with the whole crypto market losing over $71.60 billion in total market cap, for a 6% drop. As crypto assets plummeted, hundreds of thousands of traders were liquidated from their positions, effectively losing more than $1.04 billion from their trades.

Liquidation data retrieved by Finbold from Coinglass shows that, among the $1.04 billion liquidated from 177,003 traders in the last 24 hours, $836.19 million (80%) were from long positions — traders who were betting the price would go up, but faced massive drop.

Liquidation data. Source: Coinglass (registered on August 18, at 8am UTC)

Although the most affected asset was Bitcoin (BTC), with $498.81 million in liquidations from a majority of long positions, the largest single liquidation order happened for a trader of Ethereum (ETH), for $55.92 million in losses alone. ETH had over $309.08 million in liquidations, also for a majority of long positions.

What is a liquidation, and why does it happen?

Traders operating in the derivatives or margin markets usually open a position on a crypto exchange, or specialized platform, with either:

  • (A) buying a contract pegged to the token they want to trade with, and each contract has its own rules that could force the trader to close their position on realized losses; or
  • (B) borrowing money in exchange for a collateral deposit, to open leveraged positions with third-party money, that can also be forced to close in case the traded asset reaches a pre-agreed price: the liquidation price. Which causes the platform to sell (liquidate) the trader’s deposited collateral, and close their position.

Coinbase (NASDAQ: COIN) was spotted opening short positions against the cryptocurrency market during the last quarters, using financial tools like future contracts and borrows.

Bitcoin price analysis

Bitcoin’s price lost 7.39% in the last 24 hours, being traded at $26,431 by press time. Amid negative news regarding China’s Evergrande bankruptcy and the disclosure that Elon Musk’s SpaceX sold all the Bitcoin, they were holding, for $373 million.

BTC 1-day price chart. Source: Finbold

The massive dump surprised many traders, who got their trading positions liquidated, but Finbold had already reported expert analysis about one big dump, before a potential pump for Bitcoin, on August 7.

Ethereum price analysis

Ethereum also had its own ‘red day’ with 6.14% on losses, now being traded at $1,685, by press time. ETH price action is usually correlated to BTC and macroeconomics, although there are some positive signs for the second-largest cryptocurrency by market cap.

ETH 1-day price chart. Source: Finbold

As it happened to Bitcoin, experts were also foreseeing a dump for Ethereum, that would bring its price to the $1,600 zone (as it is), before a possible recovery that could drive ETH’s price up. This analysis was also reported by Finbold on August 14.

All things considered, the ability of both Bitcoin and Ethereum to meet the above analysts’ expectations will depend on further developments related to the projects, as well as the general sentiment on the wider crypto and macroeconomic landscape.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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