- Nearly $25 million in Bitcoin longs were liquidated on BitMEX alone as Bitcoin falls below $9,000.
- Over $1 billion in Bitcoin options open interest expires.
Bitcoin continues to drift downwards, falling below the $9,000 level Saturday. Bitcoin’s fall triggered another wave of liquidations across crypto markets. According to cryptometer.io, nearly $25 million in Bitcoin longs were liquidated on BitMex in the last 24 hours.
Opening Bitcoin long positions allow traders to bet on Bitcoin’s price rising in the future. Many traders use leveraged positions, allowing them to amplify their gains by borrowing funds.
For example, a trader opening a 1 Bitcoin long with 5x leverage will fund the positions with 0.20 Bitcoin of their Bitcoin and then borrow the other 0.80 Bitcoin. If Bitcoin rises 10% and the trader decides to close the position, they will realize gains on the entire position (including what was borrowed) and then pay back what was borrowed. By using leverage, the trader effectively realized 50% gains without factoring in fees.
However, leverage trading is substantially riskier than traditional trading. While leverage amplifies gains, it also amplifies losses. Traders opening a Bitcoin long with 20x leverage will lose their entire position if Bitcoin drops 5%. Considering Bitcoin’s volatility, a 5% fluctuation is not uncommon. More importantly, many exchanges offer leverage greater than 20x, meaning relatively minor price slippage can result in a wave of liquidations.
The cryptocurrency made a move upwards earlier this week, triggering a wave of short liquidations, The Crypto Associate reported.
Bitcoin Options Open Interest Expires
Prior to the massive expiry, Bitcoin options open interest was soaring to new highs. However, over $1 billion in Bitcoin options open interest expired on Friday.
Open interest helps quantify market interest in assets by representing the total outstanding contracts at the end of the trading day. While Bitcoin options open interest recovered quickly following the May expiry, it is yet to be seen if the same will occur in July.
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