After a massive cascade of liquidations, Bitcoin price could be heading towards recovery, based on network fundamentals.
Over $2.7 billion worth of futures contracts got liquidated in the last 24 hours, based on data from Bybt.com. This caused the price of Bitcoin (BTC) to see a large drop in a short time frame as it plunged from over $41,000 to sub-$32,600.
BTC/USDT 4-hour price chart (Binance). Source: TradingView.comWhy would mass liquidations cause Bitcoin to drop?
In the futures market, liquidations of positions occur because traders are borrowing additional capital to trade with larger positions.
For example, exchanges in the Bitcoin futures market typically offer up to 100x leverage. This allows traders to borrow 100 times of their initial capital to trade BTC.
The downside of leverage is that when the price of Bitcoin sees a minor drop, it can cause a position to get liquidated, or be worthless.
Liquidated long on XBTUSD: Sell 1,235,411 @ 34710.5 ~ Multi kill ~ If you