Bitcoin flash crash wipes $1B in 'speculative excess' from markets – Cointelegraph

Cryptocurrency traders are using options and futures to gain exposure to Bitcoin (BTC) after the currency plummeted more than 14% from its all-time high of $69,200 on March 5. They have raised an astonishing $1 billion in funding.

On-chain analytics provider Santiment’s March 6 post on X I have written It was revealed that the total open interest (OI) of Bitcoin, Ethereum (ETH), and Solana (SOL) exchanges has decreased significantly since the previous day’s all-time high of BTC.

Bitcoin’s open interest fell by $1.46 billion (-12%) in a matter of hours, Ethereum (ETH) fell by $967 million (-15%), and Solana (SOL) fell by $424 million (-15%). -20%) fell.

As the price of Bitcoin plummeted, open interest plummeted.Source: Santiment

The price of Bitcoin briefly hit a new all-time high of just over $69,200 on March 5, which was only slightly higher than the previous high of $69,044 in November 2021.

Santiment said much of the price speculation is driven by traders taking long positions in hopes that Bitcoin will break through its all-time high and remain above $70,000. .

Meanwhile, some of the flash came from short positions that were liquidated as Bitcoin briefly hit new all-time highs.

“In a sense, this sharp drop in open interest can be seen as a sign that ‘speculative excess’ has been temporarily removed from the market.”

Related: Daily trading volume of virtual currency derivatives reaches record high

Open interest refers to the total amount of open interest held by traders in derivative contracts. Open interest increases when a trader opens a new position in a futures or options contract. When a trader closes an existing position, the position is reduced.

Over the past few weeks, open interest has surged to record levels as traders increase bets on Bitcoin’s price movement as it heads toward new highs.

Bitcoin’s sudden price drop may have taken the market by surprise, but many experts explained to X that derivatives flashouts are a normal part of price fluctuations.

Cryptocurrency trader “Daan Crypto Trades” Said His 363,000 X followers said that after “temporarily hitting new all-time highs, we saw a huge drop and a lot of longs were flushed out,” and later added, “This correction has cost us around $3 billion. “Open interest was lost,” he added.

According to data from coin glassApproximately 312,500 traders were liquidated in the past 24 hours, with a total liquidation amount of $1.13 billion.

Bitcoin’s sudden drop resulted in $1.13 billion worth of liquidations.Source: Coinglass

Bitcoin is currently trading at $63,600, down 8% from yesterday’s high.

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