Derivatives currently represent roughly three-quarters of total cryptocurrency trading volume, magnifying the volatility caused by broader macroeconomic headlines and potential regulatory actions. Bitcoin has slid approximately 9% since Sunday, positioning the premier digital asset for its sixth consecutive week of losses. Heavy losses have mounted as liquidations of bullish crypto bets reached about $1.3 billion over a single 24-hour period heading into Friday. Despite the carnage, several market observers stress that these liquidation cascades reflect widely distributed exchange leverage rather than systemic flaws in the asset itself.
Key points
Leveraged bullish traders face heightened vulnerability as derivatives dominate the major…: Leveraged bullish traders face heightened vulnerability as derivatives dominate the majority of crypto trading activity.
Persistent inflation, high oil prices, and Federal Reserve policy expectations continue t…: Persistent inflation, high oil prices, and Federal Reserve policy expectations continue to drive Bitcoin toward its sixth weekly drop.
Competition from dip-buying opportunities in artificial intelligence stocks may be divert…: Competition from dip-buying opportunities in artificial intelligence stocks may be diverting speculative capital away from crypto markets.
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Large liquidation events — whereby more than $500 million worth of Bitcoin positions are obliterated in a single 24-hour session — are becoming a recurring feature in the market, as sharp swings repeatedly flush leveraged traders out of their bets. Bitcoin liquidations have topped $500 million on 13 separate occasions over the past year, including three instances when they exceeded more than $1 billion, according to Coinglass data spanning 28 futures exchanges.
The pattern repeated heading into Friday, when Bitcoin’s slide triggered the liquidation of roughly $1.3 billion in bullish crypto bets over 24 hours, with Bitcoin positions accounting for the majority of that sum.
“These liquidations have become more prevalent over the last 12 months compared with previous periods,” said Paul Howard, senior director at the trading firm Wincent. Many crypto investors, in search of high-risk, high-reward trading, have embraced leveraged bets, where external events — including market-moving macro headlines — have caused more intense wipeouts, he added.
Derivatives account for roughly three-quarters of trading volume across crypto markets.
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