What are crypto market liquidations? Why are these weighing on Bitcoin?

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What are crypto market liquidations? Why are these weighing on Bitcoin?

 What are crypto market liquidations? Why are these weighing on Bitcoin?
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Highlights

  • The global crypto market has faced the heat in last few days due to liquidations by traders.
  • Bitcoin, Ethereum, Cardano, Fantom, and Cosmos have been most affected due to these liquidations.
  • Crypto market liquidations refer to a scenario where a trader doesn’t have adequate money to fund a margin call. 

The broader cryptocurrency market has traded losses on account of liquidations in last few days, with Bitcoin taking the worst hit. The popular cryptocurrency remained under pressure today even as it returned to the above-US$43,000 level for a brief period.

It was nearly up 3%, pointing towards renewed buying interest after a relatively quiet week. At the time of writing, Bitcoin was trading at US$40,060, down 3.96%.

A couple of days back, the cryptocurrency market’s market capitalisation fell below US$2 trillion as liquidations stood at nearly US$200 million in worth. Bitcoin has accounted for most of the losses ever since, with US$11 million worth in liquidations.

Other major cryptocurrencies to face the heat included Ethereum, Cardano, Fantom, and Cosmos.

What are liquidations in crypto market?

The concept of crypto market liquidations refers to a scenario where a trader doesn’t have adequate money to fund a margin call.

A margin call is a call to provide additional collateral to the exchange so as to keep the trading position intact. Such liquidations happen on a regular basis in high-risk trading on account of high volatility of assets.

Source: © Aoutphoto  | Megapixl.com

Bitcoin faces resistance around US$45,000 to U$48,000

Bitcoin has traded around US$40,000 support levels in the past two weeks. These are the levels where buyers had previously positioned themselves ahead of the October price rally. The virtual currency continues to face resistance around the US$45,000 to USS$48,000 levels as intraday signals near overbought territory.

Bitcoin hit a 3-month low on Monday, touching US$39,692.03.

What is the reason behind these liquidations?

The major reason which has triggered these heavy liquidations in the crypto market is the imminent interest rate hike by the US Federal Reserve.

The sell-off began in US markets after the release of the Fed’s minutes that indicated the need for the US central bank to raise interest rates sooner than expected and reduce its overall asset holdings.

Meanwhile, Wall Street's major indices nearly closed at their lowest levels of the day on Thursday due to intense selling towards the session’s close. The Dow Jones Industrial Average fell 0.89% to 34,715.40, while the S&P 500 lost 1.1% to 4,482.74. The NASDAQ Composite ended the session 1.3% lower at 14,154.02.

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