$63 Million in Liquidations Hit Crypto Markets as Bitcoin Price Declines

Cryptonews Clara Montgomery October 15, 2024

$63 Million in Liquidations Hit Crypto Markets as Bitcoin Price Declines

Recent market analysis reveals that approximately $63 million in long liquidations occurred in the cryptocurrency market following a 3% decline in Bitcoin prices. Despite this, experts suggest a shift towards more stable cash-margined futures contracts and highlight increasing demand metrics for Bitcoin, indicating potential price support going forward.

The cryptocurrency market recently faced a notable wave of long liquidations, totaling approximately $63 million, as Bitcoin’s price experienced a decline of over 3%, settling above $65,000. Data from Coinglass illustrates that Bitcoin led this liquidation surge, with nearly $15 million attributed to liquidated positions, of which around $12 million stemmed from long positions. André Dragosch, the head of research for Europe at Bitwise, emphasized that the current increase in Bitcoin futures open interest appears more substantial and resilient than prior periods marked by high leverage. He underscored a pattern observed earlier this year, wherein a significant uptick in leveraged trading initiated a liquidation event, culminating in a 22% drop in Bitcoin’s value. Dragosch explained, “One reason for this is that traditional exchanges like the CME now dominate the open interest landscape, attracting institutional and sophisticated investors who often engage in market-neutral strategies like basis trading.” He also indicated a pivotal shift towards cash-margined futures contracts, which have ascended to their highest level, with crypto-margined contracts dwindling from 80% in 2021 to approximately 20% at present. This alteration is anticipated to bolster the stability of Bitcoin futures markets since cash collateral is inherently less volatile and not as prone to margin calls as crypto-margined contracts. Furthermore, Dragosch noted signs of increasing demand for Bitcoin, which may provide support for its price trajectory. The apparent demand for Bitcoin has been surging at its quickest monthly rate since April 2024. During a pivotal moment on Monday, U.S. spot Bitcoin exchange-traded funds (ETFs) recorded their highest daily net inflow since July 2024, while net buying volumes on Bitcoin spot exchanges reached their peak since August 2024. Additionally, the Bitcoin realized cap—calculating the price at which each Bitcoin last transacted—has risen to its zenith since May 2024, reflecting a significant rise in on-chain capital investment. In concurrence, Julio Moreno, Head of Research at CryptoQuant, remarked, “Bitcoin apparent demand is growing at its fastest monthly pace since April 2024,” and added that sustained demand could usher in elevated prices, potentially stimulating a protracted price rally in the fourth quarter of this year. The method for assessing Bitcoin apparent demand entails measuring the change in mined supply against the change in inactive supply over a specific timeframe, typically a year, thereby offering insights into market dynamics.

The article discusses recent developments in the cryptocurrency market, particularly focusing on the liquidations affecting Bitcoin as its price fluctuates. It highlights a significant amount of long liquidations following a decrease in Bitcoin’s price, indicating the challenges traders faced. Expert insights into the impacts of Bitcoin futures trading dynamics, including the shifting preference from crypto-margined to cash-margined futures contracts, are also examined. Furthermore, the article sheds light on increasing demand metrics for Bitcoin amid these market fluctuations.

In summary, the cryptocurrency market is currently witnessing substantial liquidations due to a decline in Bitcoin prices, which has raised concerns among traders. However, experts like André Dragosch suggest that the overall market structure is evolving, with a notable shift towards cash-margined contracts which could foster greater stability. Additionally, increasing metrics of apparent demand for Bitcoin signify potential support for its price, making the outlook for the fourth quarter promising, should this trend continue.

Original Source: www.theblock.co