The BTC/USDT perpetual contract hit a high of $48,168 at around 01:00 UTC, Binance data show. Around the same time, bitcoin jumped almost $3,000 in the spot market, reaching a 1 1/2-month high of $39,544, according to CoinDesk 20 data. The cryptocurrency looked poised for a rally, having toppled the widely-tracked 50-day moving average (MA) resistance at $35,000 during overnight trading.
The exaggerated bullish move in the perpetual contract probably resulted from a big trade.
"A user placed a large number of [buy] orders for BTC/USDT perpetual futures during the market upswing, resulting in a candlewick of 48,168 USDT," Binance's spokesperson told CoinDesk in a Telegram chat. "We reviewed and did not detect any system issues. No other users were affected as we utilize mark price for liquidation," the spokesperson said.
Binance is the world's largest bitcoin futures exchange, contributing $3.5 billion or nearly 10% of the global open interest of $13.9 billion, according to data provided by Skew. Open interest refers to the number of futures contracts traded but not matched by an offsetting position.
Aside from large buy orders, short liquidations or forced closure of sell positions due to margin shortage may have added upward pressure on prices.
According to data source Coinalyze, major exchanges including Binance have liquidated futures positions worth more than $650 million today. Of that, short liquidations account for almost 85%, or $550 million. The data show that futures market positioning was skewed bearish. The number of open futures contracts rose steadily since late May to hit a two-month high last week as traders took short positions.
The crypto derivatives market has seen explosive growth since the March 2020 crash. One effect of that is price volatility caused by long-short liquidations. "We would like to take this opportunity to remind the community that the crypto market can be volatile and all trading carries risks. We advise all users to trade responsibly and only trade within their means," Binance's spokesperson said.
The situation may improve going forward as Binance and FTX, two of the biggest exchanges, have imposed limits on leverage. Binance CEO Changpeng Zhao, announced early today that it had imposed a 20x leverage limit for new users starting from July 19, down from the original 100x leverage. Zhao said the new limit would be applied to existing users progressively over the next few weeks.
At press time, bitcoin was changing hands near $38,200, representing a 10% gain on the day. Meanwhile, the Binance-based BTC/USDT perpetual contract was trading at a slight discount of $38,100.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.