FTX Sees Spike In Liquidations Amid Market Surge

FTX, one of crypto’s largest exchanges processing over $10B in daily trading volume, is potentially having a record week in terms of liquidations.

The exchange has liquidated $1.21B of positions in the past two days, according to data from Coinglass. Of that, $677M was related to Bitcoin positions with another $470M related to Ether.

Liquidations On Exchanges. Source: Coinglass

Some influencers like CL, a member of investment firm eGirl Capital, are not convinced that the liquidation data is legitimate — it’s worth noting that on both Oct. 25 and Oct. 26, the data attributed $500M more in liquidations to FTX than any other exchange.

FTX did not respond to an email from The Defiant requesting confirmation that the data is correct and represents an all-time high for the exchange.

Strong Rally

Still, the liquidations aren’t entirely coincidental — they came after crypto markets ripped higher after trading sideways for more than a month. Matt Hougan, CEO at Bitwise, a crypto asset management company with over $1B in AUM, posited that the reason for the spikes was that traders needed to buy Bitcoin and Ether in order to cover their short positions.

Shorting an asset means betting on lower prices. Covering a short entails buying back the asset in order to square off the position. A sharp rise in the price of the underlying asset can lead to undercapitalized traders getting liquidated as their positions rapidly move against them.

Looking forward, analyst Alex Krüger thinks yesterday’s rally may indicate a longer-term trend. “As a general rule [it’s] best to never fade a breakout following a long period of volatility compression,” he said on Twitter.

Krüger pointed out in early October that strong price action tended to follow every time Bitcoin volatility (BVOL) dropped below 25.

Bitcoin Volatility (Top) Vs Bitcoin Price (Bottom). Source: Alex Krüger

FTX was founded in 2019 by MIT alumni Sam Bankman-Fried and Gary Wang. The company raised a $400M Series C in March from the likes of Paradigm and SoftBank which valued the exchange at $31.6B, according to CrunchBase.