Market Volatility and Liquidations in the Cryptocurrency Futures Market
High market volatility in the cryptocurrency futures market has resulted in $300 million in liquidations in the last 24 hours. Liquidation occurs when an exchange closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. This can happen when a trader fails to meet the margin requirements for a leveraged position. Large liquidations can signal a local top or bottom of a steep price move, which may allow traders to adjust their positions accordingly.
Bitcoin and Ether’s Market Responses to Regulatory Changes
On Tuesday, Bitcoin and Ether briefly surpassed $26,000 and $1,770, respectively. This was due to investors ignoring the long-term effects of a regulatory clampdown on crypto-friendly banks and data indicating slowing inflation in the US consumer price index. However, both tokens dropped by as much as 5% from Tuesday’s highs before stabilizing. On Wednesday, Bitcoin traded just under $25,000, while Ether traded slightly over $1,700.
Impact of Volatility on Bitcoin and Ether Futures
The volatility caused over $140 million in Bitcoin futures and $80 million in Ether futures to incur losses. Of these losses, 58% came from shorts, or bets against price rises, while the rest came from longs, or bets on price rises, indicating that both short sellers and long traders were equally affected.
Reactions from Alternative Crypto Assets and the Banking Sector
Futures on Conflux’s CFX tokens and Filecoin’s FIL had $8 million and $5 million in liquidations, respectively, as trading volumes for both surged on fundamental developments. Some market observers noted that investors were seeking alternative assets following the collapse of Silicon Valley Bank last week.
Bitcoin as a Stable Alternative in Uncertain Market Conditions
According to Alex Adelman, co-founder of bitcoin rewards app Lolli, Bitcoin’s rally to a new yearly high indicates that investors are looking to Bitcoin for stability in highly uncertain market conditions. While many have looked to Bitcoin as a hedge against inflation and tracked its price moves accordingly, Adelman stated that Bitcoin’s relationship to traditional finance is more complex. He added that Bitcoin worked as an alternative to the traditional financial system at large, and weakness across the banking sector had increased investor awareness of Bitcoin’s unique value proposition. In the coming weeks, there is expected to be an increased demand for Bitcoin as a superior system for holding and moving money securely.
