Bitcoin Falls Below $43K, Leads to $800M in Crypto Liquidations

In the last 24 hours, crypto futures worth over $812 million were liquidated as bitcoin broke its $46,000 support level and fell to $43,000, according to data from analytics tool Coinglass.

Bitcoin fell to as low as $42,500 in Asian trading hours on Thursday morning after trading above $47,000 on Wednesday. Traders took on $317 million worth of losses on bitcoin-tracked futures alone, with 87% of those positions betting on upward price movements.

Liquidations occur when an exchange forcefully closes a trader’s leveraged position as a safety mechanism due to a partial or total loss of the trader’s initial margin. That happens primarily in futures trading, which only tracks asset prices, as opposed to spot trading, where traders own the actual assets.

A drop in bitcoin prices led to altcoin markets seeing deep cuts. More than 200,000 positions were liquidated in the past 24 hours, with a bulk of the losses coming during the U.S. trading hours.

Over 87% of the $800 million in liquidations occurred on long positions, which are futures contracts in which traders bet on a price rise. Crypto exchange OKEx saw $241 million in liquidations, the most among major exchanges, while traders on the Binance exchange took on $236 million in losses.

Futures on ether, the native currency of the Ethereum network, saw over $164 million in liquidations. Altcoin traders saw relatively smaller losses, with Solana (SOL) and XRP traders seeing $18 million and $16 million in losses respectively.

Open interest – the total number of unsettled futures or derivatives – across crypto futures fell 8% following the move, implying traders exited their positions seeing weakening market conditions.

Wednesday’s plunge came shortly after the release of the minutes of the December meeting of the U.S. Federal Reserve (Fed). The agency revealed it would slowly reduce its $8.3 trillion balance sheet in 2022 after announcing a record asset-buying program in 2020 when the coronavirus outbreak initially started, as reported.