Bitcoin Bloodbath: Price Volatility Leads to $640 Million in Crypto Liquidations

By Sander Lutz

After a stunning morning for the crypto market that saw Bitcoin rocket 11% in a matter of hours before quickly plunging, many traders are no longer smiling, with Wednesday's rollercoaster leading to a colossal $640 million worth of crypto positions liquidations within mere hours. 

In the last 12 hours alone, about $309 million worth of crypto short positions—as well as about $333 million worth of long positions—have been liquidated, according to data compiled by CoinGlass. The majority of those liquidations, about $424 million worth, have come within the last four hours alone.

Overall, in the last 24 hours, about $700 million worth of crypto positions have been liquidated. Some $262 million of those came from Bitcoin alone, with Ethereum next up at $109 million.

According to Greg Magadini, director of derivatives at blockchain analytics firm Amberdata, such a high sum of liquidations in such a condensed period is to be expected when an asset like Bitcoin experiences as brief and extreme of a rally as it did Wednesday.

“There’s FOMO, and things get so euphoric that the second prices start to tick down,” Magadini told Decrypt. “It creates a cascading effect.”

Once prices begin to fall during an impressive price sprint, Magadini explained, the most highly leveraged traders of an asset are forced to liquidate, bringing down an asset’s price. That then forces the next level of leveraged traders to liquidate, dragging prices lower, and so on and so forth. This phenomenon is commonly referred to in finance as a “blow-off top.”

“And so it snowballs on the way down,” he added.

Perhaps surprisingly, Bitcoin only fell a few points before beginning to recover on Wednesday afternoon.

After climbing above $63,600 just after 12pm ET, the world’s top cryptocurrency began shedding value, falling near $60,000 within an hour. The token has since recovered slightly, though, to $61,000 at writing, according to CoinGecko. BTC is still up a rare 7% in the last 24 hours.

Edited by Andrew Hayward

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