Bitcoin traders are no strangers to big market swings that can decimate their portfolios in a matter of minutes. But even going by crypto standards, their wipeouts are getting bigger — and more frequent.
Large liquidation events — whereby more than $500 million worth of Bitcoin positions are obliterated in a single 24-hour session — are becoming a recurring feature in the market, as sharp swings repeatedly flush leveraged traders out of their bets. Bitcoin liquidations have topped $500 million on 13 separate occasions over the past year, including three instances when they exceeded more than $1 billion, according to Coinglass data spanning 28 futures exchanges.
The pattern repeated heading into Friday, when Bitcoin’s slide triggered the liquidation of roughly $1.3 billion in bullish crypto bets over 24 hours, with Bitcoin positions accounting for the majority of that sum.
The episodes underscore the fragility of a market already contending with ETF outflows, an AI-fueled risk-off mood that’s accelerated a downturn in various tokens and continued fallout from the recent $6 billion Binance hack, among other factors. Bitcoin has now slumped more than 20% since Oct. 21, trading as low as $66,586 in Asia on Saturday, its weakest level since August.
“These liquidations have become more prevalent over the last 12 months compared with previous periods,” said Paul Howard, senior director at the trading firm Wincent. Many crypto investors, in search of high-risk, high-reward trading, have embraced leveraged bets, where external events — including market-moving macro headlines — have caused more intense wipeouts, he added.
Derivatives account for roughly three-quarters of trading volume across crypto markets.
Bitcoin Falls Below $70,000
Alex Kuptsikevich, chief market analyst at FxPro, said that the use of derivatives have become “the norm even for investors with limited capital.” He pointed to reduced liquidity before the start of European trading hours, where a lack of institutional money means the market’s direction is less predictable. “It quite quickly reaches a point at which an avalanche of stop orders begins,” he wrote.
To be sure, some in the crypto industry cautioned against viewing large liquidation events as a signal of market fragility. “That cascade is a function of how leverage is distributed across the market, rather than a verdict on the underlying asset,” wrote Fabian Dori, chief investment officer of Sygnum Bank, noting that large liquidations have long been a characteristic of the crypto market.
Bitcoin is on pace for its sixth week lower amid a convergence of factors. Elevated oil prices and sticky inflation have reinforced expectations for additional Federal Reserve rate hikes, while Democrats retaking both chambers of the US Congress next year has raised expectations of greater regulatory scrutiny on the industry.
But another theory swirling in crypto circles is that Bitcoin is losing out in the competition for speculative capital. The selloff in artificial intelligence stocks may be creating buying opportunities that look more compelling to investors than cryptocurrencies.
That would turn a popular crypto-bull argument on its head. Just months ago, some investors expected any cooling AI rally to send speculative money toward Bitcoin. Instead, the decline in technology shares may be giving dip buyers a fresh reason to favour AI stocks over crypto.
“When Bitcoin becomes a macro asset — which it did arguably with ETFs — then it’s competing against all other macro assets for that risk crown,” said Noelle Acheson, who writes the Crypto Is Macro Now newsletter, referencing the advent of US spot-Bitcoin funds in 2024.
Trending Topics
More from Market
The oil market is brimming with crude despite tanker attacks
Deepak Fertilisers gets relief in ₹215 crore tax case; ITAT dismisses department's appeals
Listing could change the Tata way: Noel Tata flags concerns over profits taking precedence over philanthropy
Sammaan Capital Q2 Results: Profit edges up to ₹312 crore, core income turns negative
