The cryptocurrency market still remains heavily leveraged, leading to significant liquidation volume after Bitcoin fell by less than 10%
The global correction on the cryptocurrency market continues with more traders deciding to take profits and exit the market, which is leading to massive liquidation volume on various exchanges for those who decide to leave their positions open.
The current 24-hour liquidation volume on many centralized exchanges has already reached $ 640 million as Bitcoin continues to fall further. The price of the first cryptocurrency has dropped by more than 8% in the last 24 hours.
Previously, Bitcoin was already facing an 8% drop that began on November 15. Due to a high number of leveraged positions, the market also faced a liquidation worth around $ 500 million in around 24 hours.
The same large liquidation volume indicates that the previous rally was still fueled by a large number of overleveraged positions. High leverage allows traders to receive more results from their market positions using funds borrowed from exchanges.
A highly leveraged position usually has its own distinguished features, like high volatility, low liquidity and a swing-like nature. Previously, market participants could see the high volume of leveraged positions in May, when Bitcoin hit its local ATH and then came back almost 50%.
In the last few months, more exchanges started to follow safe trading practices by limiting the available leverage, making it close to rates implemented in traditional brokerages, excluding the ability to choose the “x100” leveraging options that became the industry standard back in 2017.
Regulators and central bank commissioners have often criticized cryptocurrency trading because of the market manipulation traders are exposed to due to over-leveraged markets.
