The cryptocurrency world has been in a flurry of liquidation recently. Data from CoinGlass reveals a significant $85.68 million worth of bullish bitcoin longs positions have been liquidated in the past 24 hours, indicating that traders’ stance on the leading cryptocurrency took a sideways shift as it wrestled to conquer the $30,000 mark. Over the past day, a hefty portion of $116.38 million in positions were wiped out, as traders felt the pinch of the softening crypto market.
There is an intriguing characteristic of the recent liquidations: a lot of these positions were assessed in the $30,200 to $30,500 range, and most were highly leveraged. In the futures trading world, leverage allows traders to take large positions against a comparatively small deposit, or ‘margin’. Consequently, when the market is in discord with these levered bets, traders are exposed to forced closure of positions, otherwise known as liquidations.
More intriguing is the fact that leverage has been making a comeback since its April nadir. Greater use of leverage correlates with higher probability of volatility – an essential feature of cryptocurrency markets. CryptoQuant’s estimated leverage ratio for Bitcoin has surged from 0.19 at the end of April to its present 0.25 – a sign that leverage is regaining favor in the marketplace.
On an optimistic note, we can anticipate the leverage ratio to escalate further. The latest bitcoin spot-ETF filings by traditional finance titans such as BlackRock have rekindled bullish sentiment in the crypto sphere.
Edward Moya, senior market analyst for foreign exchange market maker Oanda expressed a considerable sentiment: “People are not going to be as optimistic until we get a further update that we’re going to get that ETF done in the States.”
Amid this mixed sentiment, Bitcoin trades just above the $30,000, stimulating a delicious question in our minds: Are we on the edge of another bull run or standing at the precipice of a further downturn? Strong opinions lurk on either side of the fence, but the true answer, as ever in the fast-moving world of cryptocurrencies, is anyone’s guess.
Source: Coindesk
