Bitcoin (BTC) Crash Triggers $600 Million BitMex Liquidations

Sudden volatility shook down the derivatives markets, causing massive losses across exchanges.

BitMex, known for its sudden liquidations, saw a historic high in closed trades, wiping out $600 million of Bitcoin (BTC) positions. Other estimations see the sum between $500 and $700 million.

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The absolute peak, exceeding an earlier trading anomaly due to misreported BitStamp prices, is the biggest in the history of BTC trading. The effect of BitMex is pronounced in times of volatility.

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The sharp drop in prices caused a cascade of panic and subsequent liquidations, leading to the massive sum. But just before that, BitMex caused $150 million in liquidations on September 20.

BitMex introduced index-based liquidations, deriving the pricing from a mix of the prices on BitStamp, Coinbase Pro, and Kraken. Anomalies or premiums on those exchanges may trigger liqudiations.

Liquidations happen when the price of the underlying asset breaks through a predetermined limit. Then, positions taken up with significant leverage are liquidated, and traders lose their deposits.

The BitMex effect spread throughout derivatives exchanges. OKEx used up 84% of its insurance fund to prop up liquidations on its own market. Repercussions also included liquidations on the clients of Maker DAO.

The shock of liquidations arrives at a time when BTC market prices had established relative stability around $10,000, leaving at those levels for more than a month. But the sudden return to volatility reminded traders that BTC was in fact looking more bearish, and a slump was more probable than a new peak in prices.

BTC prices subsequently settled at the $8,400 range, with volumes re-settling at their usual range of around $17 billion per day. BTC recovered to $8,584.04 on Thursday, while some altcoins held stronger short-term rallies. BTC spot trading is well-distributed among crypto-to-crypto exchanges, with 65% of all volumes against Tether (USDT). The crash in prices arrived within the first 24 hours of the launch of Bakkt, the first physical-delivery BTC futures market.

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