Yesterday’s liquidation volume for altcoin positions potentially became the largest since May 19, 2021. As a result, leveraged capital in altcoins decreased by $12.8 billion, leading to the largest single-day reduction in open interest for altcoins in history. Notably, cascading liquidations were a frequent feature of the 2021 bull market and seem to be making a comeback as 2024 draws to a close.
Liquidations occur when an exchange forcibly closes a trader’s leveraged position (i.e., one using borrowed funds) due to partial or complete loss of collateral. This happens when a trader fails to meet the margin requirements for the position, meaning they lack sufficient funds to keep the trade open. In cases of sharp price swings, they may also fail to add collateral before their position is forcibly closed at a loss by the exchange.
From December 9 to 10, the volume of forcibly closed long positions on cryptocurrency price increases exceeded $1.5 billion. The vast majority of liquidated traders held positions in altcoins, some of which experienced sharp declines of 20–30% in a short period.
submitted by /u/XGramatik
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