Bitcoin, Ether Futures Rack up Nearly $200M in Liquidations on Short Squeeze

Price volatility arose as signs of looming recessions were renewed among investors, one analyst said.

AccessTimeIconJul 1, 2022 at 10:47 a.m. UTC
Updated Jul 1, 2022 at 3:18 p.m. UTC

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Futures tracking bitcoin (BTC) and ether (ETH) racked up nearly $200 million in liquidations as volatility on Thursday saw prices break above, and then back below, resistance levels.

On Thursday, bitcoin dipped under $20,000 amid a broader fall in Eurasian markets, recovered over that level and then fell to as low as $18,650 in U.S. evening hours. A short squeeze then saw bitcoin touch over $20,900 in early Asian hours on Friday, which was then followed by a drop to $19,400 at writing time as traders took profits.

Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).

Thursday’s downward move caused over $76 million in “longs,” or bets on higher prices, to get liquidation. This likely caused the short squeeze early on Friday.

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Bitcoin saw volatile trading in the past 24 hours. (TradingView)

Similar trading in ether futures saw the asset add more than $100 within hours as it jumped from Thursday lows of $966 to Friday morning’s $1,115. Liquidations on ether futures crossed over $100 million alone in the past 24 hours, Coinglass data shows.

Futures tracking other major cryptocurrencies, such as Solana’s SOL and Avalanche’s AVAX, saw just over $5 million in liquidations each, implying their price action was mostly spot-driven.

The volatility arose earlier this week as traders assessed fresh comments from central bankers that signaled relief from rate hikes may not occur in the coming months, as reported.

‘’Fears rattling financial markets show little sign of subsiding,” said Susannah Streeter, markets analyst at Hargreaves Lansdown, in an email to CoinDesk. “Investors (are) spooked about signs of looming recessions, while inflation stays stubbornly high.”

Fresh falls on Wall Street marked a miserable milestone with the S&P 500 tumbling in the first half of the year by 20.6%, a fall not seen since 1970 and creating a technical “bear market.” The tech-heavy Nasdaq, which has been wracked by volatility, has plummeted in value by a third this year and is on track for the biggest-ever yearly drop.

Streeter said there are concerns among investors about demand and inflation, and the Federal Reserve and other central banks will have to step on interest rate hikes to bring “red hot prices under control.”

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Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.