Overleveraged traders have felt the pain once more as volatility wiped large amounts of value in minutes. On January 4, bitcoin crashed to $27,700 and rebounded seconds later and it came as a shock for some while leaving others in financial ruin.
Based on data acquired from Glassnode on-chain analytics platform, futures traders who held long positions lost a staggering $190 million on Binance within an hour. That is the most amount lost in history within such a short time.
These figures represent the current price action in the bitcoin market as it hovers near all-time highs. Together with Ether (ETH) bitcoin has become the hottest investment in 2021. Longs had enjoyed unrivaled success in much of December 2020 and into the new year. The upside movement of bitcoin saw little in the way of resistance, and over the weekend it was creeping towards $35,000.
Despite warnings from many analysts that said the bull run may not last uninterrupted forever, many traders took on substantial risk. They bet heavily on new highs continuing. In that context, $34,800 marked a definite peak, with bitcoin shedding $7,000 in 24 hours, which included $4,000 in less than an hour on January 4.
The result that came for those that were overleveraged was plain to see.
Glassnode commented with a chart showing Binance liquidations:
“$190,000,000 (in long positions) were liquidated on #Binance within 10 minutes. Largest value to date.”
Risk Versus Reward
Based on reports from last week, it was short positions that came in for mass liquidation as bitcoin tore through $30K for the first time. That episode lost several short traders a cumulative $100 million across exchanges.
The chief strategy officer of Blockstream, Samson Mow, summarized on Twitter as the volatility continued:
“Get used to 5k dips as we go to $100k. Comes with the territory.”
Derivatives trading attached to Ether and Bitcoin, in the meantime, shows no symptom of fading in popularity. One of the pioneers in Bitcoin futures, CME Group, is scheduled to launch Ether futures in Q1 2021.