This year’s bitcoin bear market has been brutal for traders with more than $17 billion worth of bitcoin liquidated from the markets in margin trading from the beginning of this year, according to CryptoQuant.
Some of the most prominent exchanges where these liquidations occur are Binance, FTX, Okex, Bybit, Huobi, and CoinEx.
Larger liquidations evidently go hand-in-hand with big price moves and increased volatility with traders often liquidated when they’re on the wrong side of the trend. This was seen on September 9, when $114 million in bitcoin was liquidated on the short side as the currency’s price jumped from $19,321 to $21,000.
However, data also shows that traders are liquidated even when they correctly bet in favor of the daily trend – an apparent sign that they’re buying tops and selling dips or are using excess leverage.
For example, on April 21, when bitcoin dipped from $41,369 to $40,488, more than $37 million worth of the currency was liquidated on the short side. On the same day, more than $63 million in long positions was liquidated as traders bet that bitcoin would bounce back from $40,000.
The day with the highest volume of liquidations seems to be June 13 when more than half a billion dollars worth of bitcoin was liquidated as its price plummeted from $26,565 to as low as $22,447. On that day, more than $209 million was liquidated from the short side and more than $324 million from the long side.
It wasn’t just bitcoin that was liquidated — stock markets had it bad too
June 13 was also a bad day for the stock markets as the S&P500 went below the 3,800 level for the first time in the year. The month of June had also opened with a very rough trading day as more than $200 million in bitcoin was liquidated on the first trading day of the month: $109 million on the short side and $100 million on the long side.
Overall, there have been more long liquidations than short liquidations this year, consistent with the bear market trend with long liquidations reaching a total of more than $9.446 billion and short liquidations totaling $7.590 billion.
There are rarely – if ever – less than one million dollars in liquidations on each side of the trade. One notable exception was September 3, which saw only $882,198 liquidated on the short side. This did, however, contrast sharply with the more than $5 million in long liquidations as the price fell from $19,999 to $19,777. Saturdays are usually known as the day with the least liquidity during the week.
Bitcoin and crypto margin trading is big business for brokers and exchanges. Take FTX founder Sam Bankman-Fried who made much of his fortune from the many clients who trade on his exchange. However, earlier this year, the curly-haired billionaire described high leverage trading activities as “unhealthy” as Binance and FTX reduced leverage limits following a heated controversy about its role in the crypto ecosystem.