Market leaders bitcoin and ether (ETH) fell on macro concerns, ruining the day for crypto bulls who were bracing for a price rally—the worst day in almost three months.
According to data provider Coinglass, exchanges have cleared $563 million worth of leveraged bullish bets in the futures market in the last 24 hours. This is the worst single-day wipeout since Feb. 6, when Bitcoin fell to over $60,000 and $1.84 billion worth of bullish positions were canceled.
It is evident that the posture had become more unbalanced as the liquidations of shorts, or bearish bets, totaled just $65 million over the same time period.
Sharp Declines in Price Triggered Wipe Out
The second-largest token in terms of market value, ether, suffered the most, contributing $244 million to the protracted liquidations. Next came $160 million in Bitcoin. When combined, the two coins were responsible for the majority of the market-wide unwind, which reduced bullish leverage.
When a trader’s wager results in a loss that exceeds the value of their deposited cash (collateral), the exchange will liquidate their position. You may place a bullish or bearish wager in futures trading by depositing a portion of the entire contract value. Everything else is taken care of by the exchange.
Gains are amplified if market movements align with your expectations. Losses, however, escalate at the same rate and, in many cases, eventually erase the initial investment if things go wrong. If that happens, the exchange will take action to sell your stake.
That is exactly what occurred to longs when ether and bitcoin declined, which in turn lowered the market as a whole. According to statistics compiled by CMC, Bitcoin fell 5% to $77,400 in the week ending May 17 and has since maintained its losses, trading at little under $77,000. As of this writing, Ether was trading at $2,113, a 6% decline.