Leveraged derivatives traders will be massively liquidated as Bitcoin price drops $ 5,000

Bitcoin price has fallen since rising to a new all-time high last night and it seems the catalyst remains the usual culprits.

Source: TradingView

Bitcoin price fell more than $ 5,000 in just a few hours this morning. After hitting an all-time high of $ 69,000, the world’s leading digital asset fell 8.4% to a low of $ 63,200.

BTC has rebounded slightly in the past few hours and is trading above $ 64,800 as analysts round up the cause of the crash.

Margin traders will be burned again

Not for the first time, over-indebted positions in the liquidated futures market led to a wave of mass liquidations and price losses.

Analyst Dylan LeClair identified an increase in the margin on Bitcoin Futures Open Interest (OI) before the price drop.

“This afternoon there was a huge increase in open interest for BTC margin futures (traders long BTC with BTC as collateral). There is no free lunch – these traders are in the shakeout process – eliminating the weak hand. “

The source: Glassnode / Twitter

Open interest is a measure of the total number of unsettled derivative contracts.

Analyst David Puell also followed the events and noted that the increase in open interest was due to Binance and not to CME (Chicago Mercantile Exchange). The demand for contracts is higher than spot demand and they trade at a premium:

“OI acts as a trigger and also as a predictor for a liquidation event. Liquidity can be affected by smarter players. “

#BTC: That is a massive increase in open interest today, combined with a still positive derivative premium. Neither Premium nor OI seem to have been wiped off yet.

This tip is not CME as Binance seems to be. pic.twitter.com/b2OF7YaGM3

– David Puell (@kenoshaking) November 10, 2021

“That’s the big increase in open interest today, combined with a continued positive derivative premium. Both the premium and the OI do not seem to have been clarified yet. This increase is not CME, it seems to be Binance. ”

Puell added that Open Interest is also a signal at Binance as it has a larger profit margin than CME. After the crash, the contract’s premium was written off, which the analyst considers healthy.

“With consolidation after the crash, there is a healthy rotation from premium to discount. If consistent, very healthy. “

During this year’s bull market, leveraged positions were liquidated several times. In early September, Bitcoin saw a daily red candle of $ 10,000 due to the mass liquidation of leveraged long trades.

At the time of going to press, BTC is trading 3% at $ 64,800 that day. It is down 6% since yesterday’s all-time high but appears to be consolidating around that level in the last few hours.

On the flip side, support is around $ 64,300, but if there is to be a more sustained rally the price must break above $ 66,700 before a move towards new all-time highs is likely.

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Annie

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