Bitcoin’s Price Correction Leads to Closure of $1 Billion in Leveraged Futures Bets
Bitcoin’s recent price correction, following its surge to a new all-time high above $69,000, has resulted in the closure of leveraged perpetual futures bets worth $1 billion across digital asset markets. On Tuesday, the leading cryptocurrency experienced a 10% drop, falling to $59,700, prompting a significant clearing of excess leverage from the market.
Data by CoinGlass reveals that long and short traders suffered more than $1 billion in losses across major centralized exchanges over the past 24 hours. In total, 296,908 traders have been liquidated, with long liquidations amounting to $817 million and short liquidations totaling around $234 million.
- Crypto exchange Binance accounted for the majority of these liquidations at over $401 million.
- OKX followed with $367 million in liquidations.
- Bybit saw approximately $104 million in liquidations.
Bitcoin-tracked futures experienced $309 million in both short and long liquidations over the past day, while Ethereum-linked futures saw over $185 million in liquidations.
Price Corrections Normalize Funding Rates
The recent correction has had a normalizing effect on the funding rates in the crypto perpetual futures market. Annualized funding rates, which represent the cost of holding leveraged bets in perpetual futures tied to the top 25 cryptocurrencies, have now decreased to less than 20%. This is a substantial decline from the triple-digit figures observed just days ago.
The cooling of the overheated perpetual futures market paves the way for a more sustainable upward move towards new record highs. Funding rates had surged above 100% earlier in the week as Bitcoin’s strong bullish momentum attracted investors who sought to maximize their gains using leveraged products.
Exchanges employ the funding rate mechanism to ensure that perpetual prices align with spot prices. A positive funding rate indicates that perpetuals are trading at a premium to the spot price, signaling increased demand for bullish bets. Therefore, a high funding rate, as observed earlier this week, is often seen as a reflection of over-optimism, typically associated with interim market tops.
Analysts Expect Bitcoin to Maintain Momentum
Bitwise Chief Investment Officer Matt Hougan expects Bitcoin to soar beyond $80,000 this year thanks to the recent success of spot ETFs. In a recent interview, Hougan highlighted the sustained demand for ETFs, which has exceeded his expectations. He believes that this wave of interest from traditional finance, similar to Bitcoin’s IPO in the US market, will lead to further institutional investment and drive up prices.
Billionaire investor Mark Cuban has also expressed his confidence in Bitcoin’s potential as a store of value. He invested in Bitcoin because he believes there will only be 21 million Bitcoins in existence, and as more people buy and fewer people sell, the price will go up. Cuban sees it as a great store of value due to its limited supply and anticipates that demand will exceed supply.
🔥 Hot Take: Bitcoin’s Correction is a Healthy Development for the Market 🔥
The recent price correction in Bitcoin may have caused significant losses for leveraged futures traders, but it is ultimately a healthy development for the overall cryptocurrency market. Here’s why:
- Clearing Excess Leverage: The correction prompted the closure of leveraged perpetual futures bets worth $1 billion. This clearing of excess leverage helps prevent market instability and reduces the risk of cascading liquidations.
- Normalization of Funding Rates: The correction also resulted in a decrease in funding rates, bringing them to more sustainable levels. This normalization is essential for ensuring that perpetual prices align with spot prices, preventing excessive speculation and market manipulation.
- Institutional Confidence: Despite the correction, analysts like Matt Hougan and Mark Cuban remain confident in Bitcoin’s long-term prospects. The sustained demand for ETFs and the recognition of Bitcoin as a store of value by prominent investors indicate growing institutional confidence in the cryptocurrency.
While corrections can be unsettling for traders, they are a natural part of any market cycle. Bitcoin’s correction allows for healthier growth and helps establish a solid foundation for future price movements. So, don’t panic! The cryptocurrency market is resilient, and Bitcoin’s momentum is expected to continue.
By
By
By
By