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BTC Briefly Dropped Below $40K on Huobi Amid Massive Liquidation
More than $3 billion in long positions were liquidated on Tuesday.
By Muyao Shen
Updated May 11, 2023, 4:39 p.m. Published Sep 7, 2021, 7:06 p.m.
Bitcoin , the largest cryptocurrency by market capitalization, sank below $40,000 on the crypto exchange Huobi, the lowest point of any major exchange during Tuesday’s crypto market correction.
The latest market sell-off sent bitcoin’s price to as low as $42,921.27 over the past 24 hours, according to CoinDesk 20 data. But according to TradingView and Huobi, bitcoin dropped to a shockingly low $39,818.18 on Huobi.
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One trader told CoinDesk the BTC/USDT pair on Huobi fell below $40,000 briefly because Tuesday’s correction triggered liquidations of billions of dollars of trading positions, the result of margin calls on major centralized exchanges.
At the time of publication, Huobi had not responded to a CoinDesk request for comment.
According to the crypto trading data site Bybt, centralized exchanges offering crypto futures liquidated more than $3 billion in long positions on Tuesday, as bitcoin’s price started dropping sharply earlier in the day.
Forced closure of long positions, or bullish trades, account for $3.22 billion, or over 90% of total liquidations, which shows the leverage skewed excessively bullish across the market. Liquidations happen when trades cannot fulfill margin requirements for holding long/short positions and often exacerbate bullish or bearish price trends.
It “looks like it was a standard de-leveraging event,” Rahul Rai, co-head of market neutral at crypto investment firm BlockTower Capital, told CoinDesk. “Huobi had the second most liquidations after Bybit ... more liquidations [means] spot bitcoin selling [and] bitcoin trades lower on Huobi.”
Data from Skew shows that more than $290 million worth of bitcoin futures positions were liquidated on Huobi, the second most behind Bybit.
The large forced closure of long positions also pushed bitcoin futures into backwardation – a market condition where futures trade at a discount to the spot price. As seen in the chart below, bitcoin futures traded at discounts on every major centralized exchange earlier Tuesday.
At press time, bitcoin was trading at $47,284.18, down 8.62% in the past 24 hours, according to CoinDesk 20 data.
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