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The cryptocurrency market experienced significant turbulence between October 1 and 2, marked by a sharp spike in liquidations. Approximately 85% of these liquidations involved short positions, resulting in $97.73 million in short positions being liquidated within a single day. This rapid price movement impacted 29,510 traders, bringing the total liquidation value to $114.92 million. The largest single liquidation order occurred on Huobi involving the BTC-USDT pair, valued at $8.39 million.
Major exchanges such as OKX, Binance, and Huobi were at the center of these liquidations. They recorded liquidation values of $36.21 million, $33.20 million, and $27.79 million, respectively. CoinEx, in particular, saw 97.94% of its liquidations stem from short positions. In contrast, other exchanges recorded short liquidation rates ranging between 72% and 96%.
| Exchanges | Liquidations | Long | Short | Rate (Overall) | Rate (Short) |
|---|---|---|---|---|---|
| All | $114.56M | $17.05M | $97.51M | 100% | 85.12% |
| OKX | $36.21M | $6.52M | $29.68M | 31.61% | 81.99% |
| Binance | $33.20M | $6.10M | $27.11M | 28.98% | 81.64% |
| Huobi | $27.79M | $1.04M | $26.75M | 24.26% | 96.26% |
| Bybit | $10.94M | $2.98M | $7.96M | 9.55% | 72.79% |
| CoinEx | $4.88M | $100.37K | $4.78M | 4.26% | 97.94% |
| Bitmex | $593.91K | $100.82K | $493.10K | 0.52% | 83.02% |
| Bitfinex | $581.34K | $146.79K | $434.56K | 0.51% | 74.75% |
| Deribit | $367.16K | $68.72K | $298.43K | 0.32% | 81.28% |
Looking at individual cryptocurrencies, Bitcoin led the liquidation charts. Within a four-hour window, Bitcoin saw long liquidations totaling $381,540 and short liquidations reaching $1.87 million. Ethereum followed closely, with its 24-hour short liquidations peaking at $4.12 million.
Table showing the total crypto liquidations on Oct. 2, 2023 (Source: CoinGlass)
Liquidations occur when a trader’s position is forcibly closed because market movements against their speculation erode their posted collateral. When trading assets like cryptocurrencies, traders typically adopt one of two stances: ‘long’ or ‘short.’ A long position bets on an asset’s price rising, while a short position anticipates a price decline.
The liquidation mechanism activates when market movements contradict a trader’s position. For example, if the price rises while a trader is short, or drops while they are long, the position is liquidated to prevent further losses, ensuring losses do not exceed the initial margin or collateral. The prevalence of short liquidations over the past 24 hours indicates that many traders had bet on Bitcoin’s price falling, only to be caught off guard by its climb to $28,000.
Bitcoin’s price surge can be attributed to several factors. After consolidating below $27,000 for over a month, Bitcoin broke through interim resistance, targeting the $28,000 mark. Increased volatility, combined with historical data suggesting bullish trends for Bitcoin in October and November, has fueled market optimism. This volatility is expected to remain elevated, potentially driving prices higher.
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Another critical metric in this context is the realized price. Bitcoin has now surpassed the realized price for short-term holders, which stood at $27,850 on October 1. When Bitcoin’s price exceeds the cost basis of short-term holders, the likelihood of these holders selling their assets to realize profits increases.
Graph showing the on-chain cost basis for long-term holders and short-term Bitcoin holders in 2023 (Source: Glassnode)
Data from Glassnode supports this trend, showing that the short-term holder supply in profit surged between October 30 and October 1. Approximately 331,450 BTC held by long-term holders were currently in profit.
Graph showing short-term holder Bitcoin supply in profit from Sep. 2 to Oct. 2, 2023 (Source: Glassnode)
The recent liquidations and Bitcoin’s price action suggest bullish momentum. The market is witnessing a shift in sentiment, with traders growing increasingly optimistic. However, it is important to note that rising unrealized profits create a barrier to Bitcoin’s further growth. As more market participants sit on unrealized gains, expectations of further volatility could trigger selling pressure, pushing prices down.
Graph showing Bitcoin’s relative unrealized profit from Sep. 2 to Oct. 2, 2023 (Source: Glassnode)
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