It looks like the crypto bullish euphoria is coming to an end as the entire market sees a deep red for the first time in a long time.
Cryptocurrency prices plummeted, ether fell by almost 20%. Meanwhile, bitcoin fell nearly 15%, with some altcoins hit even harder.
According to By, a data mining platform for cryptocurrency derivatives, has liquidated $ 24 billion in the entire cryptocurrency ecosystem in the last 2,87 hours. This includes Bitcoin for $ 1,77 billion and Ethereum for $ 629,5 million.
Most of the liquidations happened on Binance, then on Huobi, and finally on BitMEX. The largest LiquidationA liquidation is a sale of cryptocurrencies, usually forced, as a result of an investor's inability to secure a minimum margin for their leveraged position. Notorious for their volatility in the market, cryptocurrencies can quickly and easily lead to liquidation, especially when investors lose their leveraged positions and their investment plunges into negative balance, requiring them to sell crypto assets when a position is forced out. This usually happens in cryptocurrency margin trading, when investors borrow money from a crypto exchange or broker to increase their funds or assets for trading. While leveraged trading positions can lead to higher potential profits, this is a very risky move that could lead to liquidation if the price of the asset drops sharply and you lose your initial margin or equity. If you do not have enough funds to continue trading and cannot meet the minimum margin requirements for your leveraged position, the exchange may automatically close your position, resulting in a permanent loss of funds from your initial margin. This liquidation loss can be partial or total, depending on the initial margin and the extent of the price drop. A partial liquidation occurs when a position is partially closed at an early stage in order to reduce the position and the investor's leverage, while a full liquidation occurs when almost all of the initial margin has decreased due to a price drop. To better illustrate the liquidation process in cryptocurrency margin trading, here is an example: Suppose you start with an initial margin of $100 and 10x leverage. This means that your total trading position is $1, of which $000 is borrowed from an exchange or broker. The amount of leverage corresponds to the size of your profit or loss from the position. With 10x leverage, a 5% increase in the price of an asset will give you 50% profit. The same goes for a 5% drop in the price of an asset, which will result in a loss of 50% of your initial margin. The formula for calculating profit or loss is as follows: Initial Margin × (% Price Change × Leverage) = Profit/Loss. Based on the above calculation, a 10% decrease in the price of an asset will result in a loss of 100% of your initial margin. Before you lose all of your initial margin, you can get a margin call when the liquidation threshold is reached so you can decide if you want to add more equity to your margin to keep your position open (or lose your initial margin entirely when the exchange or the broker will automatically liquidate your position). When you force-close a position, the exchange or broker may charge you a liquidation fee, but you can avoid this fee if you close the position before it is liquidated. Liquidations often occur when investors are tempted by higher leverage, which can potentially bring them greater profits, but do not consider the possibility of incurring large losses, which can also lead to liquidation. Therefore, it is very important to apply smart crypto trading strategies in order to avoid liquidations, whether starting with lower leverage or carefully monitoring margins and liquidation prices. Using a stop loss order is another way to limit your losses as the order will automatically close the position for investors when it hits the stop price to prevent further losses. Investors may also consider using exchange insurance funds to protect themselves from excessive losses. occurred on BitMEX in BTC when the exchange lost a staggering $8,72 million.
Have we exceeded the price?
Since Bitcoin broke its previous all-time high price records in 2017, it has seen almost no sales. This is the first 15% drop since the start of the last takeoff of the cryptocurrency.
Breaking historic highs on a daily basis, Bitcoin was updating high prices almost constantly. In other words, the market was constantly trying to determine the spot price at fair value.
Since Bitcoin has doubled its previous all-time high, a pullback is expected. Many users are unsure if the asset will continue to fall, find support, or recover and continue to move towards price detection.
What to expect from the cryptocurrency movement
Some retail users who are more conspiratorial have argued that “market manipulation” is responsible for the recent price hikes. But Bitcoin is inherently a volatile asset that has just experienced one of the biggest bull runs ever seen.
With such rapid growth all over the world in such a short time, it is only natural to see such price volatility as speculators take profits.
Ethereum was hit hard too. Although it accounts for about 35% of total bitcoin monetary losses, it market capitalization is about one fifth.
Cryptocurrency traders with years of experience are well aware that enormous volatility across the space is likely to persist until cryptocurrency goes mainstream.