The price of BTC declined from $10k to about $9.8k, thereby leading to a $57.8 million liquidation of Bitcoin longs at BitMex.
It happened as the number of open interest and open contracts of Bitcoin Futures surpassed $1 billion to more than $1.5 billion, thereby leading to an increase in the number of the aggregated open interest in leading cryptocurrency exchanges to more than $4 billion.
Bitcoin fell back at spot rates following a surge over $10k. However, $10k is a psychological level as well as a critical hurdle level. If the uptrend must continue, prices will need to close above this level.
Hence, the short-term downside correction in the previous hour appear to dull buyers’ hope, as well as the high number of liquidations, suggests the manner of buyers’ position staking as they anticipate higher prices this year.
Bitcoin valued at $57.8 million liquidated, but if we assume a 25X leverage, then Bitcoin valued at about $2.2 million was truly liquidated. The maximum leverage permitted by BitMex is 100X, and higher leverage means more profits.
Looking at this from a turn over perspective, a small price movement is required for the occurrence of a shake out. This is why a $300 decline led to a $57.8 million liquidation and a remarkable increment in BitMex’s Insurance fund.
Based on estimates, the fund’s growth last year was at 62 percent, revealing the number of shakeouts and forced liquidation that happened.
The purpose of Bitmex’s Insurance fund is to prevent the automatic deleveraging of traders’ positions and to aggress unfilled positions prior to their filling.
As at the time of writing, the XBT balance was at 34,125.3274.