Bitcoin Leverage: Lack Of Liquidations Could Indicate Another Wave Of Selling
January 26 2022 - 6:00PM
NEWSBTC
Bitcoin finally broke below the $40K point this past weekend. This
had sent the cryptocurrency back towards six-month lows. One thing
though was that liquidations or the digital asset remained lower
than expected. The current liquidation volumes lay well below the
volumes that have accompanied previous crashes like this one. This
could be a very important indicator for the market. Bitcoin
Liquidations Remain Low In Shakeout Previously, whenever the price
of bitcoin had dumped this hard, liquidation volumes have quickly
risen. This is due to the massive sell-offs that follow such
crashes as investors try to get out of a bleeding market. This time
around, bitcoin liquidation volumes have not jumped. They remain
really low, indicating that maybe investors were not done selling
their holdings. Related Reading | Has Bitcoin Reached Its
Bottom? Analyst Says It Still Has A Long Way To Go If this is the
case, then there may be more downside coming as the week runs
toward the end. Massive sell-offs have already sent the digital
asset to lows not seen since mid-last year. Another round of
sell-offs could end up pushing the cryptocurrency’s value down
below $30K. Last Friday, when the price of BTC had successfully
broken below $40,000, the bitcoin futures and perpetual markets
were rocked by liquidation. By the time the beginning of the
weekend rolled around, over $854 million in long liquidations were
already recorded. This may seem like a lot but compared to previous
iterations of this type of shakeout, liquidations have fallen
short. BTC liquidation volumes fall short of expectations | Source:
Arcane Research May 2021 was the last time that BTC’s price had
taken a similar plunge. In total, the market saw $4.8 billion worth
of liquidated longs across the market. Indicating that the sell-off
in May was more intense than those recorded in January of 2022. One
explanation for the low liquidation volumes is that traders were
able to re-allocate and add collateral to underwater trades, given
that they’ve had more time to reassess their positions. Where Are
The Liquidations Happening? Another reason for the low liquidation
volumes could be the data available for analysis. Back in May 2021,
crypto exchanges like Binance and ByBit had their bitcoin
liquidation data out for anyone who wanted to have a look. Since
then, there has been a change by both exchanges where they now
restrict their liquidation. Now, analysts are having to guesstimate
liquidation volumes using historical data from the exchanges. BTC
price begins uptrend | Source: BTCUSD on TradingView.com Binance
still retains dominance of the market, thus, not having access to
the crypto exchange’s bitcoin liquidation data could severely
affect the volumes of liquidations being reported. The crypto
exchange’s dominance in the market has risen since before its data
was restricted, suggesting an even larger pool of liquidations that
are not being reported correctly. Related Reading | Bitcoin
Whales Take Advantage Of Market Crash To Gobble Up Millions In BTC
Nevertheless, the liquidations have spilled into other spaces in
the industry. Decentralized finance (DeFi) did not escape the
onslaught in the least as it was also rocked by liquidations.
Featured image from Bitcoin News, charts from Arcane Research and
TradingView.com
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