In a seismic development for the cryptocurrency market, Binance’s recent settlement with the U.S. Securities and Exchange Commission (SEC) has triggered a sharp decline, leaving futures traders grappling with substantial losses. The repercussions were most keenly felt by those betting on the platform’s continued growth.
Data from CoinGlass reveals that cryptocurrency exchanges liquidated over $227 million in perpetual futures positions within the past 24 hours, marking one of the most significant liquidation events in 2023. Remarkably, nearly 80% of these liquidations were bullish long positions.
Bitcoin longs and shorts, denoting bets on and against price rises, accounted for over $67 million in liquidations during this period. The extensive liquidation activity substantially impacts the market sentiment, raising questions about the short-term trajectory of cryptocurrency prices.
Traders involved in Ethereum (ETH) futures suffered losses totaling $27 million, while Solana (SOL) traders were hit with a $10 million blow. BNB, the token associated with the Binance ecosystem, experienced a comparatively smaller $6 million in liquidations, underscoring its close ties to the exchange’s fortunes.
Notably, traders on Binance itself bore the brunt of the fallout, facing a staggering $100 million in liquidations, the highest among counterparties. OKX, another prominent crypto exchange, also felt the impact, with traders there absorbing losses amounting to $62 million.
Liquidation occurs when an exchange forcibly closes a trader’s leveraged position due to a partial or total loss of the initial margin. This typically transpires when a trader fails to meet the margin requirements for a leveraged position, indicating insufficient funds to maintain the trade.
Analysts suggest that large-scale liquidations can serve as a signal for potential local tops or bottoms in the market, providing valuable insights for traders looking to position themselves strategically. Moreover, the data indicates a flushing out of leverage from popular futures products, signaling a potential short-term decline in price volatility.
The market turbulence follows Binance, the world’s largest cryptocurrency exchange, agreeing to pay a substantial $4.3 billion settlement to the SEC over allegations of violating sanctions and money-transmitting laws.
In what has been termed “one of the largest penalties” ever obtained from a corporate defendant, Binance’s founder, Changpeng “CZ” Zhao, pleaded guilty to charges, agreeing to pay a $50 million fine and step down from the CEO position.
Richard Teng, former Abu Dhabi regulator, and Binance’s regional markets head, is set to assume the CEO role, marking a significant shift in the leadership of the prominent crypto exchange.