On Saturday, November 14, Bitcoin fell to $62,000. In a day it lost more than 8%. According to CoinGlass, exchanges forcibly closed positions worth $2.05 billion over the same 24 hours, and almost $800 million of that came from Binance.
A liquidation is the forced closure of a leveraged trade. The exchange closes the position itself when the trader's collateral is no longer sufficient. CoinGlass counts such closures across the exchanges it tracks.
The overwhelming majority of liquidations were on bets on growth. More than 320,000 traders were affected: these are accounts that no longer existed by the end of the day.
How the fall unfolded
- November 12: BTC went below $72,000, after which the decline accelerated.
- The weekend: the market passed through $66,000, $65,000 and $64,000.
- The break of $63,000: it was recorded by Coinbase and Bitstamp.
- Saturday: the low turned out to be 12.5% below the low of November 12.
The drawdown from the October high exceeded 24%. Ethereum fell more than 10%, and the entire crypto market lost $571 billion in ten days.
Why the price went down
The rate is weighing. The market has fully priced in a 25 basis point Fed rate hike in December. That is 0.25 of a percentage point.
Another hike, in January, has been largely priced in by the market, while a week earlier it was estimating it at about 10%. The reason is inflation.
- 0.4%: that is how much US consumer prices added in October versus September.
- 0.3%: core prices for the same month, that is, excluding food and energy.
Money was leaving the funds too. US spot Bitcoin ETFs showed net outflows for seven trading sessions in a row through November 13.
A spot ETF is an exchange-traded fund through which an asset is bought like a stock.
- $1.91 billion: total outflow over this series of sessions.
- $1.07 billion: outflow for the week, the second week in a row above a billion.
- $399 million: given up by Ethereum funds, their outflow streak reached seven weeks.
A blow to leveraged accounts
The price decline was knocking out margined long positions. Each such closure pushed the price further down.
The main point: in a decline, leverage works against the trader, and forced closures accelerate the decline itself.
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The nearest reference point
By Sunday morning BTC and ETH had bounced back from their Saturday lows.
- The December Fed meeting: the nearest reference point on the rate, the date is in the economic calendar.
- Flows into funds: Bitcoin ETFs have had outflows for seven sessions, Ethereum funds for seven weeks.
Were you long on the night of Saturday?
Then you were among those 320 thousand or one step away from them. Guessing the direction is not enough: a position dies from the leverage used to add volume on a deposit of a couple thousand dollars. Prop trading comes at it from the other end - a paid selection process, then access to the company's account and an agreed percentage of what you earn. A large notional removes the need to squeeze out movement with 20x leverage. The path from selection to payout is worth understanding before the next such night.