Many Investors Have Lost Everything As Crypto Market Dips By Over $200B.
As bitcoin prices plunged below $43,000, $3.5 billion in liquidation took place, dropping the market value from $2.3 trillion to $2.1 trillion at the time of writing.
A total of 369,103 traders liquidated their accounts for the day. The biggest liquidation order happened on Huobi-BTC.
What is liquidation?
- Investors leveraged positions are liquidated if an exchange closes them for a partial or total loss of their initial margin when on cryptocurrency markets.
- A trader who is incapable of meeting the margin requirements for a leveraged position (doesn’t have the funds to keep the position open) will be forced to liquidate the trade. Liquidation occurs both in margin and futures markets.
- In the case of a large move against a leveraged position, you can lose the entire collateral (initial margin) you paid. Some countries, such as the United Kingdom, consider crypto trading such a risk that they have prohibited crypto exchanges from offering leveraged products to retail investors in order to protect them from losses.
Bitcoin’s 16% plunge in the wake of its official recognition as legal tender in El Salvador had fueled bullish sentiment as the United States was coming off of Labor Day holiday weekend.