Bitcoin Rapid Crash Causes $1 Billion Loss In Leveraged Market
Bitcoin fell to its lowest point in more than a week leading to the liquidation of more than $1 billion worth of digital assets before a steep recovery.
Bitcoin lost 6.3 percent to $91,000 late Thursday before it recovered above $98,000 levels on Friday morning. The asset has increased by more than 38% over the last 30 days due to President-elect Donald Trump’s optimistic sentiment.
According to CoinGlass data, the move caused more than $1.07 billion in market liquidations, of which about 80%, or $817 million, came from positions betting on higher prices. In contrast, during the last four hours, long liquidations of bitcoin have increased to over $400 million.
In perpetual futures contracts, traders with long and short positions exchange money at funding rates. The contract price is kept in line with the price of the underlying asset. A high funding rate means many traders placed large bets on one side, usually longs.
Many traders were over-leveraged on the assumption that prices would continue to rise, as indicated by Thursday’s move and high funding rates. A steep decline in price resulted from forced liquidations when the market turned against them. In the past, analysts warned that market players should be aware of “profit taking” along the way and remind themselves that assets rarely rise “forever” in a straight line.
This comes after Bitcoin unexpectedly surged above the renowned $100,000 mark late Wednesday night, hitting all-time highs above $103,000. BlackRock’s iShares Bitcoin Trust (IBIT) reached the milestone in just 228 days with assets under management of over $50 billion, five times faster than any other ETF in history.
Trump’s reelection has been widely attributed to the recent spike in Bitcoin and other cryptocurrency prices, fueled by his pro-crypto campaign and promises aimed at the industry
Trump has appointed former SEC commissioner Paul Atkins to head the regulatory body, his selection as the next chairman of the Securities and Exchange Commission came shortly after he took credit for Bitcoin’s achievement of breaking the $100,000 mark on Thursday
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