The game of whales (owners of large amounts of cryptocurrencies) can be dangerous and, in the last 48 hours, it has caused a loss of nearly $1.5 billion for traders worldwide. A fantastic sale – in a bad way – for all those who decided to play it.
the game of whales
In derivatives, unlike the cash market, the investor is not buying or selling an asset he has in his portfolio, but simply placing a bet, using other people's assets (usually from the exchange/brokerage firm), on what the market's behavior will be .
He uses the assets of the house, often against itself. It is a very risky type of operation because it deals with values, most of the time, leveraged, but even more risky because it is betting against the big whales of the market that control all this internal information, asset flow and hold large capital that can be used to generate buyer or seller pressures according to their interest.
The maxim used in casinos is also valid in this market: “The house never loses”.
why fantastic sale
The concept of settlement may vary depending on the context and the author.
In the cryptocurrency market, the term is normally used to describe the phenomenon in which a trader's position in the derivatives market (usually operating on margin or futures) is closed by the exchange itself after reaching a total or partial loss limit. This limit can be defined by the exchange itself or by the trader's equity that is being used as collateral for leveraged transactions.
When the limit is reached, the trader's trading contract is closed and he takes the loss (taking a rekt) which is the difference between the opening of the position and the closing of the position through the exchange.
And fantastic, well… Fantastic because the numbers are really shocking.
In mid-November there was a massacre of settlements very close to the current one, with US$873.05 million settled in 24 hours, but this time it was even greater.
$889.46 million dollars in 24 hours
In mid-January 6th, the Coinglass website registered a fantastic sale of US$889.46M in 24 hours, leaving 224,892 traders at a loss.
In the same record, in the first 12 hours of these 24 hours the losses were almost US$600 million !
As a comparative measure, so that you can understand the size of the loss, on January 7th there were losses of $536.48M , which is already an extremely high and devastating number for the market, but it was still lower than the first ones. 12:00 the day before.
On the second settlement day, 139,740 traders lost their bet against the market, resulting in 364,632 losers (equivalent to 12% of the entire population of Brasília).
The total amount settled in these 48 hours was $1,425.94 million , or $1.42B USD .
To get an idea of the size of the losses, if we convert 1 billion in seconds that would be equivalent to about 32 years.
The fantastic sale value of these two days is equivalent to the value – in dollars – of the bitcoins purchased by Tesla last year .
In these two days, the champion of sales was the market leader Bitcoin (BTC) with a sum of $511.2M (~ 35% of the total) of losses, followed by Ethereum (ETH) with $394.97M (~ 27% ), being responsible for more than half of all the losses generated, thanks to its high trading volume and market capitalization over the others.
Moral of the story
The derivatives market can offer much greater gains – through leverage – than the spot market, and generate a temporary commitment to the asset through a bilateral contract that can even protect the trader in relation to liquidity (ability to transform the asset in cash).
But it also opens the door to bigger losses, often really devastating, especially when carried out by less experienced investors.
Furthermore, betting on futures creates a dependency on the institution (the “house”) where these contracts are being purchased and traded.
The investor needs the institution to remain honest and healthy in order to realize its profits, and there is little it can do if a serious problem happens halfway (before the contract expires).
How important is it to have the sovereignty of your investments?
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The content Fantastic Sale: About $1.5 Billion Dollars in 48h first appeared in Cointimes .