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Bitcoin Volatility Hits Longs and Shorts as $175M Liquidated, $1B in Open Interest Wiped
Few leveraged futures traders were safe as bitcoin’s price movements impacted both longs and shorts.
Updated Apr 27, 2023, 3:01 p.m. Published Apr 27, 2023, 5:59 a.m.
Sudden volatility in bitcoin caused traders of both long and short futures to be impacted as $175 million worth of positions was liquidated and $1 billion in open interest was effectively wiped out in the past 24 hours.
Longs are bets on higher prices, while shorts are bets on lower prices. Liquidation occurs when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. This happens when a trader does not have sufficient funds to keep the trade open.
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Large liquidations can signal the local top or bottom of a steep price move, which may allow traders to position themselves accordingly.
Crypto exchange OKX had over $52 million in bitcoin futures liquidations on its platform, followed by counterparts Binance and OKX at $38 million and $29 million each, respectively.
The largest single liquidation order happened on BitMEX, a bitcoin/tether trade valued at $6 million.
Bitcoin climbed to over $30,000 during the Asian evening hours on Wednesday on hopes of favorable monetary policies in the U.S, some market analysts opined. That move didn’t last long, however, as sudden sales drove prices to the $27,700 level following the U.S. market open.
Rumors of bitcoin sales from the U.S. government and beleaguered crypto exchange Mt. Gox may have further impacted prices, as prices fell to as low as $27,200. However, such data alerts were later confirmed to be misclassified by the on-chain firm Arkham Intelligence, which initially sent out the alerts.
Arkham said it did not believe its alerts caused the market panic as they were sent to a “small subset” of users much after bitcoin’s move.
Bitcoin has since retraced Wednesday’s losses to regain the $29,000 level in Asian morning hours on Thursday. Some $200 million in open interest has been added, data from Coinglass shows.
Crypto majors have followed bitcoin’s lead with a slight recovery at writing time. Ether climbed to above $1,900, hit 8 cents, while Cardano's ADA nearly reversed all losses from Wednesday’s drop with a 3.8% gain over the past 24 hours.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
What to know:
- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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