 | Due to the gigantic declines in the past two days, the number of futures liquidations have increased significantly. People who opened a long-future got off on the wrong foot. Many were liquidated by the sharp drop in bitcoin. If you were already struggling with your portfolio, think about these people: the futures contract holders. These are investors who have a futures contract (futures), where you can trade in bitcoin or other crypto with leverage. They probably suffered the most in today's dump, because they were hoping this was already the bottom. Futures When investors use too much leverage, such as 50 times, it means that they go up or down 50 times faster in the face of a price change. In reality, this means that if the price of bitcoin goes up 1%, for example, the the long futures contract - where the investor hopes the price will go up - makes a 50% profit. These are very risky investments, as this also works the other way. The math wizards among us figured this out a long time ago: if a long futures contract of 50 goes down a tiny bit, the losses can be very bad. In this case, if the price of bitcoin were to fall by 2%, this is equivalent to a 100% loss. This is called a liquidation, as you then disappear all your funds. So in the last 24 hours this has happened with a $500 million liquidation. Yesterday this counter even stood at almost a billion dollars. Happens more often The past decline was somewhat expected. The price had not yet been below the previous low of December 4 (bitcoin versus the dollar). It happens more often that the price of crypto seeks out a low point and then continues to rise. At these lows, many people sell, making this an ideal place for big players to buy up. Investors like to sell below previous lows through a sell order, as they expect the price to drop further. This ensures that large investors can buy crypto for a cheap amount from people who 'panic sell' at the bottom. Dip of May As seen in the chart above, this also happened after the dip in May. The first two attempts had failed, but after the third, the price did not go lower. Here was enough buying to keep the price from going that low again. Investors who went long thought that the price could not go any lower, but they were wrong, so they are deceived today. [link] [comments] |
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