Bitcoin rout wipes out US$10 billion in leveraged positions in US$500 billion sell-off, and counting
- Outstanding futures contracts have tumbled from a US$28 billion peak in April to just US$13 billion Thursday
- Bitcoin was recently quoted at US$39,967, clawing back some of its losses over two days
Cryptocurrency markets are stabilising after a US$500 billion bitcoin wipeout snuffed out a slew of speculative excesses that had been building for months.
Signals across the virtual-currency complex show leveraged positions are getting flushed out while dip-buyers are emerging – helping fuel a return toward US$40,000 for the world’s biggest token.
As the dust settles following the Wednesday crash, Bybt data shows liquidations have totalled roughly US$10 billion since Wednesday. Outstanding futures contracts have tumbled from a US$28 billion peak in April to just US$13 billion Thursday.
The hundreds of billions of dollars changing hands across derivatives this week eclipsed activity in the cash market, as speculators rushed to close positions in the meltdown.
“The sell-off was greatly exacerbated by a lot of leverage,” said Martin Green, chief executive officer at Cambrian Asset Management, a US$150 million crypto fund. “Now that the excess leverage has been liquidated, we have seen longs and leverage starting to be placed once again.”
It all shows the power of crypto derivatives markets, where activity has exploded with the rise of multibillion exchanges that cater to Wall Street and retail traders alike. The extreme volatility and big money in digital currencies is starting to draw regulatory attention, with the US Treasury Department calling for stronger tax compliance within the space.