Data indicates that the cryptocurrency derivatives market has suffered a massive amount of liquidations following the sudden collapse of Bitcoin in the past 24 hours.
Bitcoin has seen significant fluctuations over the last day
BTC has shown some wild price movements in the past day, with the high of $103,500 and low of $90,500 occurring within a narrow window. The transition to the final level, in particular, was so severe that it could only be described as a flash collapse.
Below is a chart showing what the final trajectory of the asset was like.
From the chart, it appears that the sharp red candle lasted only briefly, as the cryptocurrency was quick to bounce back to higher levels. After the recovery, the coin is trading at around $98,000, which means it is still down about 5% since the peak.
In usual fashion, other digital assets have also followed BTC in this bearish price movement, but the likes of Ethereum (ETH) and Solana (SOL) have proven to be more resilient as their prices have fallen by just 2% over the past day. .
The latest market-wide volatility means chaos on the derivatives side of the cryptocurrency sector.
Cryptocurrency purchases have just seen liquidation pressure
According to data from Queen Glassthe cryptocurrency derivatives market suffered a significant amount of liquidation as assets across the sector witnessed sharp price action.
As shown in the table above, a whopping $893 million worth of cryptocurrency derivatives positions were liquidated in the last 24 hours. A contract is said to be “liquidated” when an exchange forcibly closes it after incurring losses of a certain degree.
Approximately $733 million of this liquidation involved long-term contracts, representing 82% of the total. This sharp dominance of long positions is of course a result of the net bearish movement that Bitcoin and others have experienced.
A mass liquidation event like this last one is known as a “squeeze.” Since long trades make up the majority of this squeeze, it is called a long squeeze.
The prolonged pressure that the derivatives sector has just experienced is perhaps the clear result of the hot market conditions that were developing in the period leading up to the crisis. As CryptoQuant community analyst Maartunn pointed out at X mailOpen interest rose alongside Bitcoin’s rise.
Generally, when derivatives positions explode during a rally, it means the rally is driven by leverage. Price movements of this type can decline in a volatile manner.
Open interest has risen by more than 15% in Bitcoin’s recent wave, which is considered a very large amount. When the price reversed direction, all these leveraged buy trades fell into a squeeze trap, which only provided more fuel for the collapse, which explains its particularly severe nature.