Data shows the cryptocurrency sector has witnessed a massive amount of liquidations after the crash that Bitcoin and company have gone through.

Crypto Derivatives Market Has Just Seen A Long Squeeze

According to data from CoinGlass, a large amount of liquidations related to cryptocurrency contracts has occurred on the derivatives platforms during the past day. “Liquidation” here refers to the forceful closure that any open contract undergoes by its exchange after it has amassed losses of a certain degree (the exact percentage of which is dependent on the platform).

There are mainly two factors that can significantly affect the chances of a contract finding liquidation. The first one is volatility. An asset that tends to be volatile is naturally harder to predict, so the risk of liquidation can be higher.

While volatility is something that’s not really in the hands of an individual trader, the second factor, the leverage, is. “Leverage” is a loan amount that any investor can opt for against their initial position.

The advantage of leverage is that any profits earned by the holder are multiplied by the same multiplier as the leverage. While this can sound lucrative, it’s also true that any losses incurred become more by the same magnitude. Thus, it takes a smaller price move in the opposite direction to the bet for the same position to get liquidated when leverage is in the picture.

In the cryptocurrency sector, coins often display volatility and speculative demand can be heavy. The result is that mass liquidation events, popularly known as squeezes, happen on the regular.

Bitcoin and the altcoins have displayed some sharp price action during the past day, so it’s not surprising to see that such an event has occurred in the derivatives market yet again.

The data for the liquidations that have taken place during the last 24 hours | Source: CoinGlass

As is visible in the above table, liquidations across the cryptocurrency derivatives sector have cro

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Author: Keshav Verma