2021-01-17 17:28
$500 million in cryptocurrency futures liquidated as bitcoin falls below $34,000: What happens next?
In the cryptocurrency market, positions worth more than $500 million were liquidated in the last 24 hours when bitcoin fell below $34,000. Why were so many positions liquidated?
Overnight, the price of bitcoin rose 6.7 percent from $35,500 to nearly $38,000. Meanwhile, the futures funding rate rose sharply, indicating an over-leveraged market. On the major exchanges, the funding level for a perpetual Bitcoin futures swap contract rose to about 0.07%. Given that the average funding rate typically hovered around 0.01%, the futures market was crowded on its way to $38,000. Thus, the price of bitcoins began to fall when several large sell orders entered the market at just above $38,000.
The overheated futures market further exacerbated the correction. Overall, $500 million in liquidation is a small number compared to last week, for example, when Bitcoin saw $1 billion in futures contracts liquidated on peak days. Is bitcoin's bottom close? But this drop did not reduce open interest in the futures market, which raised fears of a larger pullback. The futures market still has a large number of traders betting on bitcoins, which opens up the possibility of another long squeeze. A pseudonymous trader known as "Salsa Tequila" said that if bitcoin falls below $30,000, it will enter "bear market territory."
Consequently, in the near term, it is critical for BTC to maintain $30,000 as a macro support zone. He said: "If we go below $30,000, that's bear market territory. We'll have enough underwater bags to hold us for a long time. Until then, I think it could go either way. If it comes back and holds above 40k, I think around 50-60k is plausible. I think $ BTC exceeded is a bias, not a deal." In addition, according to CryptoQuant CEO Ki Young Joo, open interest in the futures market is still growing rapidly. At the same time, on-chain signals indicating buyer demand have stagnated over the past few days. Based on a combination of a crowded derivatives market and a lack of buy signals, Key wrote that the market is uncertain and that it could retest $30,000. He wrote, "People are trading $ BTC with low leverage, open interest is skyrocketing, and the ratio of long to short positions looks neutral. Strong online buying signals that have driven this bull market have yet to emerge. $ BTC may retest 30k, so I don't have a position in this uncertain market right now."
As Cointelegraph previously reported, traders on Binance, the largest open interest futures exchange, began using lower leverage last week. This indicates a heightened level of fear in the market and a lack of confidence in the short-term trend of BTC prices. On the other hand, some traders remain optimistic in the medium term, explaining that the current pullback from the $40,000 levels was not only expected, but is essential to keep the rally from overheating.
Translated with
www.DeepL.com/Translator (free version)
Poll
