Bitcoin's $90K Drop Could Trigger $540M Liquidation
1min read Bitcoin's recent price fluctuations have sparked concerns among investors, with analysts warning of potential liquidation events if the cryptocurrency falls below a certain threshold. According to data from coinglass, if Bitcoin drops below $90,000, the cumulative long liquidation volume on mainstream centralized exchanges (CEXs) could reach a staggering $540 million.
This potential liquidation event highlights the risks associated with leveraged trading in the cryptocurrency market. Long positions are typically taken by investors who expect the price of Bitcoin to rise. However, if the price falls below a certain level, these positions may be liquidated, leading to significant losses for investors and potentially causing a cascade of selling pressure.
In contrast, if Bitcoin's price were to surpass $95,000, the cumulative short liquidation volume on mainstream CEXs could reach $361 million. Short positions are taken by investors who expect the price of Bitcoin to fall. If the price rises above a certain level, these positions may be liquidated, leading to significant losses for short sellers.
It is essential to note that the liquidation chart provided by Coinglass does not precisely show the number of contracts awaiting liquidation or the exact value of contracts being liquidated. Instead, the bars on the liquidation chart represent the importance of each liquidation cluster relative to neighboring clusters, i.e., intensity. The liquidation chart shows to what extent the underlying price will be affected when it reaches a certain level. Higher "liquidation bars" indicate that the price reaching that level will generate a more intense reaction due to a liquidity cascade.
As Bitcoin's price continues to fluctuate, investors and traders must remain vigilant and monitor the market closely. Understanding the potential risks associated with leveraged trading and being prepared for liquidation events can help investors make informed decisions and mitigate their losses. The cryptocurrency market remains volatile, and investors should exercise caution when engaging in leveraged trading.
