Last week’s crypto crash leads to $1.2 billion in BTC liquidations while Terra’s LUNA went to zero so let’s read more in today’s latest altcoin news.
Some bitcoin traders saw their accounts wiped out in the last week’s correction and the derivatives traders lost over $1.2 billion in liquidations. The long positions took the brunt at the start while the short positions got burnt later. When the TerraUSD stablecoin started losing its peg to the dollar and crypto markets started slipping, the BTC derivatives traders lost over $1.2 billion in liquidations as per the data from CoinGlass. This is more than double the amount for the same period of the previous week which saw $542 million in trades liquidation and the picture on the markets seemed quite grim. According to Coinglass data over $1 billion in assets was wiped on May 8 which was the biggest figure in more than three months.
Last week’s crypto crash led to over $300 billion in market cap as BTC dropped from $35,000 to $30,100 and now BTC is trading at around $29,700 per CoinMarketCap. In investing, liquidations happen when the traders have to close a long or short position in an asset that is performing contrary to the expectations. The investors that bet on BTC derivatives products could be forced to liquidate in the event of a margin call when the account has insufficient collateral and keep the position open.
The traders expect the asset to increase In value over time and in a short position, the trader anticipates the value of the asset to decrease in a certain amount of time. If the trader thinks the price will go higher and then it does, they can sit back and allow the profits to roll in. However, if the price goes down, the trader will have to pour more or have the collateral liquidated. The Liquidations put sell pressure on BTC that have to drive the price down further and cause more liquidations. The long positions took the brunt at the start but mid-week which started to shift as short positions became hit harder. This is because the pessimistic traders expected the crypto rout to continue but the price started to stabilize.
And it wasn’t just BTC. The markets had a brutal week as Terra’s collpase contributed to a degree of market contagion. With the Terra UST stablecoin slipping from the price of $1, the LFG put a few measures into effect and lent $750 million in BTC and another $750 million in UST to restore the TerraUSD parity with the dollar. However, the LFG forced reselling of BTC came at a bad time for rthe markets and put more pressure on BTC which worsened the crash. The measure didn’t work instead flooding the market with the UST and LUNA as Terra entered a death spiral.
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The native token of the Terra ecosystem is trading at $0.0001 and the community debated whether to fork the blockchain and become terra Classic.
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