What Does High Liquidation Mean (Where Does the Money Go After Liquidation)?

What does high liquidation mean? What does high liquidation mean?

In the cryptocurrency market, high liquidation refers to the sudden closure of positions by investors after experiencing significant losses. This situation usually occurs within exchanges or other markets, but it is also common for funds to flow out of large accounts due to a decline in Bitcoin prices. If a market manipulation leads to a sharp decline, it is considered a typical high liquidation. Therefore, this includes high liquidation resulting from any cause.

I. What does high liquidation imply? II. Why does it generate such significant profit? III. Why does it result in such massive losses? IV. Why are the losses so severe? V. How should the issue of high liquidation be handled?

Where Does the Money Go After Liquidation

Editor’s Note: This article is from BlockBeats (ID: blockbeats) and written by 0x22. It is authorized to be reposted by Odaily Star Daily.

Around 1 AM on October 15th, the price of BTC experienced a sharp drop, reaching around $48,000 at its lowest point, followed by a rapid rebound but soon fell below $50,000 again. OKEx Bitcoin quarterly contracts also experienced negative premiums. According to data from Binance, as of 18:34 Beijing time today, OKB is now priced at 3.77 USDT, down 2.03% in the past 24 hours, and HT is temporarily priced at 5.66 USDT, with a 12.61% increase in the past 24 hours. (Data source: BitUniverse)

After this wave of liquidation, a large amount of funds have flowed from one exchange to another, with most of them going to platforms like Huobi and Bitfinex, whose leverage ratios range from 20% to 40%. In the past week, many institutions have profited through OTC trading and hedge funds, earning significant profits.

However, just a few days ago, due to the low market sentiment and lack of market liquidity, some users suffered losses, experiencing significant losses. So, which individuals were involved in this black swan event? Let’s take a closer look today. 1. Dumping by the whales triggered sell-offs. Around 5 PM on November 16th, Bitcoin briefly surged over 10% to reach $49,000. At that time, the total market value of the cryptocurrency market was a little over 2.3 billion RMB, accounting for only 1% of the global total. However, as the overall market trend gradually weakened, retail investors’ funds began to move to other mainstream cryptocurrencies.

According to CoinMarketCap, the current price of Bitcoin is fluctuating above $40,000, while the price of Ethereum is below $30,000 and even lower. This led investors to believe that they may face significant liquidation risks.

In this situation, some people chose to sell their assets in order to maximize their profits. However, when the price of Bitcoin continues to rise, people usually convert their Bitcoin into cash or other cryptocurrencies or tokens for trading. For example, some miners may convert a portion of their mined BTC into stablecoins. Additionally, some individuals attempt to generate more profit through these actions.

2. High liquidations cause panic among a large number of users.

Around 8:30 AM on December 17th, Bitcoin suddenly dropped by nearly $10 million, with the largest single liquidation amount reaching $30 million. In the afternoon at 2 PM, large accounts experienced liquidation of over 6,000 ETH. At this time, Bitcoin was in a very special time period, and its price continued to decline. During this period, the price of BTC kept falling and almost reached the $47,000 mark, but quickly rebounded and reached a high of $54,100.