Bitcoin Plummets as Derivative Positions Are Liquidated
The price of Bitcoin on Sunday was around $58,500. The cryptocurrency has rebounded some to around $53,000. The derivative positions were liquidated by crypto exchanges looking to free up capital.
According to Bybt.com, around $1.5 billion in open interest, or traders' overleveraged positions, were liquidated by crypto exchanges in the past 24 hours.
Traders that are overleveraged are using margin to maximize their gains, but risking more losses, on crypto. When the price of Bitcoin hit a limit called a margin call, traders are forced to close their positions or have them be closed by crypto exchanges.
"In the past weeks, a lot of accumulation on the long side happened, so traders should expect such correction events," Bitfinex CTO Paolo Ardoino said.
Most of the liquidations occurred on Binance, Huobi, and Bybit.
The price of other cryptocurrencies fell as well.