• Kraken’s settlement with the US SEC led to a market decline, causing $220 million in liquidations on crypto futures trading.
• 90% of liquidated positions originated from traders betting on higher prices.
• Liquidation data serves as a signal of leverage being washed out, providing insight into price volatility.
Crypto Market Decline Spurs $220M in Liquidations
The crypto market recently experienced a significant decline due to Kraken’s settlement with the U.S. Securities and Exchange Commission (SEC). This caused roughly $220 million in liquidations on crypto futures trading, with over 90% of those positions originating from long traders who were betting on even higher prices.
What is Liquidation?
Liquidations occur when an exchange forcefully closes a trader’s leveraged position owing to either a partial or total loss of the trader’s initial margin. This occurs when the trader does not have sufficient funds to keep the trade open and meet the margin requirements for their leveraged position.
How Does Liquidation Affect Price Volatility?
Data regarding liquidations can be beneficial for traders as it serves as an indication of leverage being effectively removed from popular futures products — thereby providing useful insight into short-term price volatility. For example, within the last 24 hours Bitcoin and Ether cumulatively saw over $100 million in liquidations while Dogecoin, Solana, XRP and Aptos each had about $4 million in liquidations apiece.
Biggest Losers: Long Traders
Long trades — or bets on higher prices — took 90% of all liquidated positions during this period and thus bear much of the brunt during these market declines. Binance was hit hardest among counterparties with over $95 million in losses while OKX took second place with around $47 million lost in liquidations.
Kraken Settles With SEC Over Crypto Staking Platform
Kraken agreed to immediately end its crypto staking-as-a-service platform for U.S customers and pay a fine of $30 million to settle Securities and Exchange Commission (SEC) charges that it had been offering unregistered securities through its platform prior to this settlement agreement