• Bitcoin shorts have been liquidated in the futures market as BTC prices surge above $19,000.
• Liquidations occur when a derivative exchange has to forcibly close a contract on the Bitcoin futures market.
• Total futures liquidations have spiked in the past day, according to data from the on-chain analytics firm Glassnode.
The crypto world has been abuzz with the recent surge of Bitcoin prices past the $19,000 mark, a level it hasn’t touched since the 2017 bull market. But while the news of BTC’s rise has been welcomed by many, there’s another story that has been glossed over – the massive liquidation of Bitcoin shorts in the futures market.
According to data from the on-chain analytics firm Glassnode, short liquidations have spiked in the past day. A “liquidation” takes place when a derivative exchange has to forcibly close up a contract on the Bitcoin futures market. This happens when a certain percentage of the margin – the collateral amount that the holder had to put up in order to open the position, is lost due to the BTC price moving opposite to the direction the investor bets on.
The amount of liquidations taking place in the Bitcoin futures market is represented by the “total futures liquidations” metric. This metric tracks the total amount of both short and long liquidations that have taken place in the Bitcoin futures market recently. According to Glassnode, a whopping $93 million worth of short liquidations happened in just one hour as BTC prices pushed past $19,000.
The reason for this is twofold. First, most of the assets in the crypto space are generally very volatile, so sudden price swings can take place without warning. Second, many derivative exchanges offer leverage (a loan amount taken against the margin) as high as 100x in the original position. High leverage being accessible in a volatile environment like this results in a large risk of positions being liquidated.
So while the news of BTC’s rise has been welcomed by many, it is also important to pay attention to the implications of the large liquidations taking place in the Bitcoin futures market. As the crypto space continues to grow and mature, it is important to keep an eye out for both the good and bad news in order to make the best possible investment decisions.
