The price of cryptocurrency saw high volatility last night due to rumors that turned out to be false. Some of the key facts in this regard are an alleged system failure at Arkham which generated false alerts and the subsequent liquidation of a total of USD 57.25 million in Bitcoin on April 26.
CryptoNews broke the news via its Twitter account, as were rumors of alleged BTC moves by the U.S. government and the bankrupt exchange, Mt. Gox.
The news came after reports from blockchain analytics firm Arkham that wallets linked to the defunct cryptocurrency exchange Mt. Gox and the U.S. government had moved significant amounts of Bitcoin.
In this respect, Arkham CEO Miguel Morel indicated that the wallets’ movements were not connected, meaning that the U.S. government was not necessarily moving or selling assets related to Mt. Gox. An hour later, Arkham clarified via Twitter that the alert was sent by error, and only to a “small subset of users.”
During Wednesday, April 26th last hours, the price of Bitcoin (BTC) had high volatility that led it to lose almost 10% of its price in less than an hour, to then recover it little by little.
Faced with these market movements, traders tried to position themselves upwards (long) or downwards (short) to try to profit from this high volatility.
In such a context, the statistics website CoinGlass shows that both bulls (or “bulls”) and bears (or “bears”) suffered roughly similar liquidations of their positions, as shown in the graphic published in the image below:
What are Liquidations in Bitcoin Trading?
In the context of Bitcoin and cryptocurrency trading, liquidations refer to the process by which an open position in futures, options, or other derivatives contracts is automatically closed by the system of an exchange platform.
This process takes place when the value of the position reaches a predetermined level of loss, known as the maintenance margin. Closeouts are a security measure implemented by trading platforms to protect both investors and the platforms themselves from possible excessive losses.
In the cryptocurrency market, settlements can occur both for traders who trade long (bulls or “bulls”), and for those who trade short (bearish or “bears”). The former expects the cryptocurrency price to increase, while the latter bet it will decrease. When a liquidation occurs, the open position is forcibly closed and the funds of the trader involved are used to cover the losses generated by the position.
The first ones expect the price of the cryptocurrency to increase, while the second ones bet that it will decrease. When a liquidation occurs, the open position is forcibly closed and the funds of the trader involved are used to cover the losses generated by the position.
Liquidations tend to be more common in situations of high market volatility, such as the one experienced in the case described in the news item.
Regardless of the cause of the flash crash, the sudden and steep price drop wreaked havoc on the derivatives market, with the total amount of liquidations exceeding USD 211 million today. Bitcoin traders accounted for almost USD 97 million of these settlements.
By Marina Meza
