Bitcoin Sell-Off: Why Large-Scale Liquidations Are Becoming More Frequent

Bitcoin’s volatile price movements have led to an increase in large-scale liquidations, wiping out billions of dollars worth of leveraged positions over the past year. The trend highlights the risks faced by traders using borrowed funds to bet on cryptocurrency prices.

Bitcoin Liquidations Cross $500 Million On 13 Occasions In A Year

Bitcoin positions worth more than $500 million were liquidated in a single 24-hour period on 13 occasions over the past year, including three instances when the amount exceeded $1 billion, according to Coinglass data covering 28 futures exchanges.  

According to Bloomberg, the latest sell-off triggered the liquidation of about $1.3 billion in bullish crypto positions over 24 hours, with Bitcoin accounting for most of the total. Bitcoin has fallen more than 20 per cent since October 21 and touched $66,586 in Asian trading on Saturday, its lowest level since August.

Rising Leverage And Derivatives Trading Intensify Liquidation Risks

Derivatives accounts form around three-quarters of trading volume across crypto markets. Leveraged positions allow traders to take larger bets with limited capital, but also expose them to forced exits when prices move sharply against their positions.

Paul Howard, senior director at trading firm Wincent, told Bloomberg that large liquidation events had become more frequent over the past 12 months. He attributed the trend partly to traders taking on larger exposures in pursuit of higher returns, making their positions more vulnerable to sudden market movements.

Alex Kuptsikevich, chief market analyst at FxPro, said derivatives had become common even among investors with limited capital. He also highlighted the risks during periods when institutional participation is limited. In such conditions, relatively small price movements can trigger multiple stop orders.

Are Large Liquidations A Sign Of Market Fragility?

Large liquidation figures do not necessarily indicate that Bitcoin itself is weakening. Fabian Dori, chief investment officer at Sygnum Bank, said liquidation cascades reflected how leverage was distributed across the market rather than serving as a verdict on the underlying asset. He added that large liquidations had long been a feature of crypto markets.

Bitcoin is also competing with other assets for speculative capital. The cryptocurrency's growing presence in mainstream financial markets, particularly after the launch of US spot Bitcoin exchange-traded funds in 2024, has brought it into competition with other asset classes for investors' risk capital.