Bitcoin traders are increasingly accustomed to massive market swings that can erase fortunes in minutes. However, even by crypto standards, these wipeouts are growing larger and more frequent. Large liquidation events, where over $500 million in Bitcoin positions are wiped out in a single day, have become common. In the past year, such events occurred 13 times, with three instances exceeding $1 billion in liquidations, according to Coinglass data.
The trend continued on Friday, when Bitcoin’s decline triggered roughly $1.3 billion in liquidations over 24 hours, with Bitcoin positions making up most of that amount. The market is facing multiple challenges, including ETF outflows, an AI-driven risk-off mood, and the aftermath of the recent $6 billion Binance hack. Bitcoin has dropped more than 20% since October 21, hitting a low of $66,586 in Asia on Saturday, its weakest level since August.
Paul Howard, senior director at Wincent, noted that liquidations have become more prevalent over the last year. Many crypto investors are drawn to leveraged bets, which amplify the impact of market-moving events. Derivatives now account for about three-quarters of trading volume in crypto markets. Alex Kuptsikevich, chief market analyst at FxPro, observed that derivatives have become standard even for investors with limited capital, leading to unpredictable market movements.
Some industry experts caution against interpreting large liquidations as a sign of market fragility. Fabian Dori, chief investment officer of Sygnum Bank, argued that these events are more about leverage distribution than the underlying asset’s health. Bitcoin is on track for its sixth consecutive week of declines, influenced by factors like elevated oil prices, sticky inflation, and potential regulatory scrutiny. Another theory suggests Bitcoin is losing out to AI stocks as a destination for speculative capital, reversing earlier expectations.