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$ 500M in long positions were liquidated yesterday as Bitcoin fell $ 4,000



Bitcoin fell nearly $ 4,000 in a steep nosedive last night, sweeping the broader crypto market with it and causing over $ 500 million in "long" liquidations.

Funding rates were high across the board on Tuesday, leading some traders to comment on an impending near-term market dip. “The open interest has reached an ATH. Let's do a little bullish shake-out before we go any further, ”tweeted Lex Moskovski, CIO of Moskovski Capital.

Liquidations occur when leveraged positions are automatically closed by exchanges/brokers. Futures and margin traders who borrow capital from the stock exchanges (usually in multiple amounts) in order to place larger bets, deposit a small amount as security, known as margin, before concluding a deal.

Funding rates, on the other hand, are regular payments to long or short traders based on the difference between the market for open-ended contracts and the spot price. As a result of the funding rates, the price of the open-ended futures contract approaches the index price.

Higher funding rates usually mean a move in the opposite direction, which leads to a cascade of liquidations in future products.

Such behavior was seen in the market last night. According to data from Coinfloor, long positions (i.e. traders betting on rising prices) worth nearly $ 500 million have been liquidated. Binance accounted for $ 235 million of that, while OKEx traded $ 196 million.

Bitcoin alone accounted for $ 200 million in liquidations, followed by Ethereum ($ 96 million), Polkadot ($ 37 million) and XRP ($ 27 million). A total of 172,378 traders were liquidated, with the largest single liquidation order taking place on Bitmex - an XBTUSD trade valued at $ 10 million.

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