Bitcoin Crash Sees Traders Lose $1 Billion; Experts Consider Derivatives Flush-Outs Normal
Summary:
After Bitcoin (BTC) hit a fresh all-time high of $69,200 on March 5, it crashed by more than 14%, leading crypto traders who utilized options and futures to lose $1 billion. This was coupled with a significant decrease in the total open interest on Bitcoin, Ethereum, and Solana exchanges. Despite market fears due to Bitcoin's sudden drop, some experts view such derivatives flush-outs as normal in price movements. Approximately 312,500 traders were liquidated, causing $1.13 billion worth of liquidations following Bitcoin's drop. Bitcoin is currently trading at around $63,600, down 8% from its peak.
Bitcoin (BTC) enthusiasts leveraging options and futures have faced a harsh blow, losing a cumulative $1 billion as the popular cryptocurrency experienced a significant drop of over 14% following its fresh peak of $69,200 on March 5. On-chain data analyst firm, Santiment, revealed in a post on March 6 that there was a noticeable drop in total open interest (OI) on exchanges for Bitcoin, as well as Ethereum (ETH), and Solana (SOL), after Bitcoin's record high the previous day. The open interest in Bitcoin experienced a dip of $1.46 billion (-12%), Ethereum's shrank by $967 million (-15%), and Solana's plunged by $424 million (-20%). This drop in open interest coincided with Bitcoin's price decline.
Bitcoin's price reached just over $69,200 on March 5, marginally surpassing its November 2021 high of $69,044. Santiment disclosed that most predictions were based on traders placing long positions, anticipating Bitcoin would shatter a new record and remain above $70,000. A minor portion of the downturn resulted from short positions getting wiped out as Bitcoin momentarily achieved a new peak. According to Santiment, the drop in open interest can be seen as a temporary removal of 'speculative excess' from the markets.
Open interest is the aggregate of open positions traders have in a derivatives contract. When a trader forms a new position on a futures or options contract, it escalates open interest. The closing of an existing position decreases it.
In the past weeks, due to traders anticipating Bitcoin's climb to new heights, open interest soared to unprecedented levels. The surprising drop in Bitcoin's price seems to have alarmed the market, but some experts argue that derivatives washouts are a normal occurrence in price trends.
Crypto trader 'Daan Crypto Trades', with 363,000 followers on X, commented, "Following a brief surpassing of the all-time high, we witnessed a drastic fall, flushing out a lot of long positions," He added that roughly $3B in open interest was wiped out during the correction.
According to Coinglass data, about 312,500 traders were liquidated, with the total liquidations being $1.13 billion in the past 24 hours. Bitcoin's sudden fall led to liquidations worth $1.13 billion. Currently, Bitcoin is trading at approximately $63,600, an 8% decline from its all-time high a day ago. Magazine: Wolf Of All Streets has expressed concern over a scenario where Bitcoin climbs to $1M: Hall of Flame.
Published At
3/6/2024 7:50:06 AM
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