24 Jan 2022
Liquidations picking up, but remain far below what we’ve seen earlier
Far lower liquidation volumes accompanied the weekend plunge below $40k than during previous shakeouts.
We estimate that the BTC futures and perp markets saw a total of $854 million worth of long liquidations on Friday as bitcoin plunged below $40,000 down towards $35,000. For reference, the last time bitcoin fell below $40,000 from the upside on May 19th, 2021, a total of $4.8bn worth of longs got liquidated in the BTC market.Back then, the sell-off was far more intense than what we’ve seen this time around. Bitcoin fell from $58,000 to $29,000 over the course of seven days. Now, traders have had more time to re-allocate and add collateral to underwater trades, possibly explaining the less intense long liquidation volumes witnessed in the market.We also had more reliable liquidation data in May as Binance and Bybit now restrict their liquidation data. The liquidation volumes from these exchanges are estimated using historical data. Today, Binance’s dominance in the futures market is far higher than what we saw earlier times when Binance was not restricting its liquidation data. Binance’s OI account for near 30% of the entire futures market. The last time leverage was this concentrated in a single exchange was back in March 2020 when BitMEX and OKEx dominated the market.The turmoil on Friday also caused liquidations in DeFi. A large whale was close to seeing $600m worth of ETH becoming liquidated on Maker, but he was able to save the vaults after $65m worth of ETH had been liquidated.