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Bitcoin, Ethereum Crash Liquidates $1.1 Billion Leveraged Traders

Nivesh Rustgi

Jan. 4, 2021

The price of Bitcoin plummeted 20% in what experts are calling a bullish correction after topping out at all-time highs.

Bitcoin, Ethereum Crash Liquidates $1.1 Billion Leveraged Traders

Key Takeaways

Bitcoin plunged $7,000 from the top at $34,800 liquidating future longs worth over $1 billion.
Ethereum also dropped 23% as over-leveraged long positions in the crypto market favored the bears.
Despite negative prices, market sentiments continue to be positive.

Bitcoin and Ethereum prices dropped all the weekend gains before the traditional markets opened for trading Monday, liquidating $1.1 billion leveraged orders.

Nevertheless, market sentiments continue to wax bullish despite the carnage.

Bullish Bitcoin, Ethereum Selling

On Sunday at 5 PM CST, the CME futures market opened with a gap of $4,000 since closing at $29,385 before the holidays on Dec. 31.

Bitcoin crossed $30,000 for the first time over the weekend, topping at $34,800 this morning. However, the correction came just as quickly, as BTC prices dropped 20% around 1 AM CST.

Bitcoin futures on CME prices traced back to $28,440, filling the positive gap.

Bitcoin futures prices on CME. Source: Trading View

The volatility in Ethereum was even stronger as the second-largest cryptocurrency topped $1,150 for the first time in three years. The price of ETH, however, corrected 23% to $900 after peaking at $1,170.

Across exchanges like Binance and Huobi, over $1.1 billion were liquidated in the last four hours, with Bitcoin longs accounting for nearly 93.6% of the amount.

Liquidation data on crypto exchanges. Source: Bybit

A 30-40% correction has been a standard in Bitcoin bull markets, which seldom run on over-leveraged longs across these platforms.

For example, the funding rate for Ethereum longs on BitMEX—even after the drop—is close to 474% annually. Similarly, for Bitcoin, the funding rates are running above 70% annually. Moreover, a quick recovery above $30,000 after the CME gap fill is seen as a robust bullish signal.

https://twitter.com/CanteringClark/status/1346075318839357440

While the bullish market sentiments seem unhinged by the correction, the high funding rate for long orders on futures markets can act as a catalyst for additional correction. Todays’ low, around $27,750, will act as support for a positive trend.

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