In the last 24 hours, the liquidation of short and long positions in the crypto futures market reached a significantly high value, amounting to around 550 million dollars.
The rally of Bitcoin and the attack on historical highs is accompanied by a rise also for Ethereum and many other altcoins, which are experiencing extreme volatility in both directions.
Open interest at the highest level of the last 3 years and funding rate exposed in an excessively positive way complete the picture of this uncontrollable FOMO.
Staying clear-headed in the midst of euphoria seems really difficult, but by looking at the data and focusing on price levels where more liquidations converge, we can draw rational and well-considered conclusions regarding the risk that the crypto market presents at this moment.
All the details below.
Settlements skyrocket in crypto futures as market volatility rises
The situation of the last 24 hours is truly unusual for the crypto derivatives market, especially for the futures section on major exchanges such as Binance, Bybit, Okx, and Huobi where liquidations exceeding half a billion dollars are recorded.
We remind you that the term “liquidation” indicates a situation in which an exchange is forcibly closed and the leveraged position of a trader due to a partial or total loss of the trader’s initial margin.
Large liquidations can signal the local high or low of a strong price movement, which can allow traders to position themselves accordingly.
Looking at the liquidation chart provided by Coinglass, we can see an overall ” REKT ” of 550 million dollars in the last day of speculative trading, divided more or less evenly between short and long positions.
Of all these, 246 million occurred on BTC and ETH (with a prevalence of liquidated shorts) while in many “alternative coins” the margin call occurred to the detriment of longs.
On the memecoin front, where in these days we have witnessed an explosion of prices out of the ordinary, we notice that coins like DOGE, PEPE, WIF, and MEME are experiencing larger bull liquidations compared to bear ones.
Overall, the group has left over 31 million dollars on the table in long positions, despite the bullish trend in recent days.
SHIB, BONK, LINK, DOT, THETA and SOL instead lead the trail of short liquidations with 44 million dollars lost by bettors betting on the downside.
BTC’s rally around 68,000 dollars triggered a strong trading flow in the crypto markets, where traders heavily used financial leverage, allowing them to trade more than they actually own, further exciting a market in full euphoria.
The open interest on BTC and ETH, which describes the sum of open positions in the entire derivatives sector, reached a value that has not been seen for 3 years during the last bull market, respectively 18.3 and 9.4 billion dollars.
The funding rate on the two most capitalized assets in the crypto sector is through the roof, but the same goes for the rest of the alt, where we see traders demanding A LOT of long leverage.
The funding rates of the last 8 hours exceed in almost all cases the threshold of 0.1% (longs pay this interest to shorts) even reaching above 0.18% on LINK, ADA, and DOGE and above 0.25% on PEPE and BONK.
Regarding these topics, on Tuesday the QCP Capital fund declared in a Telegram broadcast that:
“Buyers with financial leverage probably won’t sell until we surpass historical highs, which could happen at any time. This is a level of financial leverage similar to what we saw in 2021, pushing the front end of the curve higher and keeping the back end elevated.”.
Pay attention to these price levels on BTC: high risk of squeeze or flash crash
While traders are in a frenzy for the arrival of the Bitcoin halving let’s try to keep a clear mind and identify the most important liquidation levels for the asset, where a large part of the liquidity is concentrated
With the excitement and enthusiasm of the crypto market at its peak, and with the price volatility reaching extreme levels, the risk of a squeeze to the upside or a flash crash increases significantly, so it is necessary to be aware of the risks we are facing.
Let’s start from the assumption that in order to analyze the situation concerning the most important futures liquidation zones, each exchange presents its own data.
Here we take as a reference futures market the cryptocurrency exchange Binance, as it alone accounts for about a quarter of all derivative volume on Bitcoin.
According to Coinglass data on this trading platform, in the last 24 hours the most closely watched price levels are, of course, those located above the all-time highs at $69,000.
Once that level is surpassed, short liquidations for approximately 45 million dollars could be triggered, with the risk of a potential squeeze to the upside.
The Bitcoin supply shock on OTC desks, contributes even more to making this hypothetical scenario a reality, as Wall Street ETFs are required to buy spot coins as the underlying asset of their funds, causing a substantial reduction in supply and contributing to the impact of demand on prices.
Expanding slightly the horizons, on a weekly time frame, we see, instead, how the substantial part of the liquidations is found in the price range between $60,000 and $61,500.
Here there are over 2 billion dollars ready to jump in case of a fall (values may vary as BTC approaches its price to the fateful level) that could trigger a reversal of the short-term trend, with the bias shifting from bullish to bearish.
Be careful not to be fooled by potential flash crashes with spikes that end above these price zones: as long as BTC does not drop below $60,000, the bullish trend is safe and sound in the immediate future.
Finally, zooming out further, we notice how the focus shifts to the price level between $49,500 and $50,500.
In this range we find the beauty of over 5 billion dollars in long positions ready to evaporate in case of collapse.
A return below these prices would inevitably cause a loss of enthusiasm, favoring total panic, with the outlook completely reversed in favor of excess shorts rather than longs.
This is a rather unlikely scenario at the moment, but we must take it into consideration given the unpredictability of the market.
It is also very interesting to note the absence of hypothetical settlements between $55,500 and $51,000: this means that traders are simultaneously exposed to price levels higher and lower than this range.
