The Cryptocurrency market suffered a hard blow yesterday, Wednesday, December 18, when Bitcoin (BTC) experienced a day of high volatility. This caused the liquidation of more than $400 million in the futures market.
The price of bitcoin fell sharply from the $105,000 to $98,000, although it has since recovered and is currently trading at $102,000, as seen in the following chart. TradingView.
Bitcoin (BTC) price in the last 24 hours. Source: TradingView.
This decline of the first digital currency on the market It put downward pressure on the rest of the cryptocurrencies.
In the futures market, losses were in the millions. According to Coinglass explorer datathe two major peaks of liquidations, mainly bullish, reached more than 400 million dollars, as seen in the graph.
Settlements in the cryptocurrency market. Source: Coinglass.
The vast majority of these liquidations correspond to long operations, that is, traders who invested upwards in price. The rest corresponds to short positions, who bet on a downward price.
It is important to detail that these liquidations are the product of a forced closure of leveraged positions of traders in the futures market. This occurs when traders operate with money that is not their own but is lent to them by the exchange..
With that money, traders can bet that the price of the digital asset will go up (long position) or go down (short position). If the price moves in favor of the investor, he can obtain large profits. However, when the price of BTC or any asset moves in a position contrary to that bet by the trader and the loss exceeds the initial margin deposited, the exchange liquidates that position with the aim of recovering the losses.
He leverage It is a financial strategy that allows investors to increase their exposure to the market with borrowed capital, as defined by Criptopedia, the educational section of CriptoNoticias.
What caused the fall of bitcoin?
The drop in the price of bitcoin was genetoda by statements by the president of the United States Federal Reserve, Jerome Powell.
In a press conference held yesterday, after the meeting of the Federal Open Market Committee (FOMC), the official explained that, according to the Federal Reserve Law, it is not possible for the organization to hold bitcoin. Powell clarified that he is not looking to keep BTC in the Federal Reserve and that this is an issue that must be addressed in Congress.
These statements come in the context that Donald Trump, president-elect of the United States, has promised the creating a reservation strategic national in bitcoin when he is president.
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