After today’s incredible Bitcoin move where the price shot up to $ 47.5,000, shorts worth around $ 47 million were sold out within an hour.
$ 47,000,000 in Bitcoin futures liquidated in just one hour
As one analyst at Twitter, around $ 47 million in Bitcoin futures shorts were liquidated in an hour today.
If you don’t know what BTC futures trading is, it is basically a type of trading where investors can speculate on the price of the coin without actually having to own it. They must provide a minimum guarantee, called a âmarginâ, in order to participate. Some exchanges like Binance allow the cryptocurrencies themselves to be used as margin.
When an investor thinks that the price of the coin will go down in the future, he is betting on it using a âshortâ futures contract.
Those who assume a bullish outlook for Bitcoin go “long”. In either case, investors make a profit if the coin moves in the direction they are betting.
Related reading | Bitcoin Volume & Volatility Suggest Trend Waking Up
However, if BTC moves the opposite of what they imagined, they end up taking the loss and have to pay it off using their margin.
All futures positions require a minimum amount of margin to remain open. In a liquidation, an exchange forcibly closes a trader’s position due to a partial or total loss of the initial margin.
Here is a chart showing the liquidations of short futures positions over the past two days:
BTC futures short liquidations show a sharp spike | Source: Glassnode
As you can see in the chart above, around $ 47 million in futures shorts were sold out in the span of an hour today as Bitcoin surged sharply.
Related reading | Diamond Hands: 80% of Bitcoin’s Circulating Supply Now Belongs to Long-Term Holders
This shows that a fairly large number of losses have been suffered by these traders today. However, such liquidations are not uncommon in the crypto market due to its high volatility.
Regardless of the risks, many traders still use futures contracts to protect their positions in the spot market because no matter how the market goes, they can end up making a profit.
As of this writing, the price of Bitcoin is floating around $ 47,000, up 12% over the past seven days. Over the past month, the crypto has lost 1% in value.
The chart below shows the coin’s price trend over the past five days:
BTC's price shoots straight up | Source: BTCUSD on TradingView
After a long period of consolidation between the $ 40,000 and $ 45,000 levels, Bitcoin has finally taken the plunge. The coin’s value climbed 10% in 24 hours during this peak where the crypto hit $ 47.5,000.
Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com