- Crypto markets take a dive as Bitcoin fails to sustain $40,000.
- Millions in cryptocurrency long positions have seen liquidations in the past twenty-four hours.
Following the massive run-up to $40,000 during the past few weeks, Bitcoin may be entering a correction. The recent Bitcoin drop has rippled across other crypto markets, multiplying losses. According to cryptometer.io, during the last twenty-four hours, over $56 million in cryptocurrency longs have seen liquidations on Bitmex.
Bitcoin long positions allow traders to bet on Bitcoin’s price rising in the future. Long positions are often opened using leverage. Leverage allows traders to borrow funds and increase their buying power to amplify gains. However, leverage also exposes traders to larger losses on their initial position.
Leverage trading allows traders to leverage greater trading power. For example, to open a 1 Bitcoin position with 10x leverage, the trader only contributes 0.10 Bitcoin to the position and borrows the rest. By doing so, the trader has the trading power of one whole Bitcoin and, therefore, amplifies potential returns on the 0.1 Bitcoin by approximately 10x.
While leverage trading can help traders amplify gains, it can also amplify losses at the same rate. For example with 10x leverage, a 10% move in an opposite direction may result in liquidations and the trader losing their entire initial contribution to the position. Therefore, traders trading with large amounts of leverage may face liquidations during price fluctuations.
Disclaimer: Content displayed on thecryptoassociate.com is not investment advice. Investors should do their own research before investing in digital assets or anything displayed on this site. The Crypto Associate does not recommend trading any sort of investment in cryptocurrencies and digital assets. The Crypto Associate is not responsible for any losses incurred due to the buying or selling of cryptocurrencies displayed on this site. All content is for informational purposes only. The Crypto Associate does not endorse, affiliate or represent any third-party links including advertisements. The Crypto Associate participates in affiliate marketing. Read the full disclaimer