- Over $72 million in Bitcoin longs were liquidated on BitMEX as Bitcoin continues to fall.
- Bitcoin briefly touched $10,000 on some cryptocurrency exchanges yesterday.
Bitcoin has seen an increase in volatility in the last 24 hours as Bitcoin briefly touched $10,000 on some exchanges before falling back to current trading levels at $9,200. The volatility is wiping bulls as Bitcoin long liquidations on BitMEX skyrocket to $72 million in minutes as Bitcoin continues to fall.
Bitcoin shorts and longs allow traders to bet on Bitcoin’s price, typically in a leveraged fashion. Put briefly, Bitcoin short holders stand to make a profit if Bitcoin’s price declines. On the other hand, Bitcoin long holders stand to make a profit if Bitcoin’s price rises. However, many exchanges also offer leverage positions, allowing traders to borrow a portion of the position they are opening reducing their own contribution to that position. While leveraging positions allows traders to amplify gains, traders also stand to increase losses.
For example, a trader opening a 1 Bitcoin long with 10x leverage will only fund the position with 0.10 BTC of their funds while borrowing 0.90 BTC. If the trader closes the position 10% higher, they stand to make a 10% gain on the entire position including the borrowed funds. After paying trading and leverage fees, the trader’s initial funds in the position will be worth nearly 10x. However, traders can also lose at 10x the rate if Bitcoin’s price moves downwards which results in position liquidations. Therefore, trading leveraged positions is substantially riskier than traditional spot trading.
Bitcoin Options Open Interest Rises
While BitMEX Bitcoin long liquidations are good news for Bitcoin bears, other indicators may still be pointing towards a bullish sentiment. Bitcoin options open interest has been on the rise across the board. As reported by The Crypto Associate, Bitcoin options open interest on the CME platform has recently soared past an all-time high.
Open interest represents the outstanding contracts of an asset at the end of the trading day. As a result, open interest can help quantify outstanding interest in an asset.
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