Liquidation Events In Crypto Trading: Analyzing Bitcoin Cash (BCH)

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Liquidation events in Crypto Trading: a more in -depth look at Bitcoin Cash (BCH)

The cryptocurrency market has increased in the liquidity and volatility in recent years, many investors seeking to capitalize on price fluctuations. However, this increased commercial activity is delivered with a new layer of liquidation risk events. In this article, we will immerse ourselves in the world of liquidation events in crypto trading, by specifically focusing on Bitcoin Cash (BCH), one of the most used altcoins.

What are liquidation events?

Liquidation events occur when the price of a cryptocurrency falls below its level of support or is highly occurred, which makes him lose value quickly. Consequently, investors can decide to close their positions, to make losses and potentially trigger liquidations of other traders. This can lead to a rapid drop in prices because buyers are forced to leave the market.

Bitcoin Cash (BCH) – A case study

In 2017, Bitcoin Cash emerged as a Bitcoin competitor, seeking to increase his own price potential thanks to a more practical and friendly design. The price of the part soaring, reaching a summit of $ 64,804.71 in July 2017.

However, the cryptocurrency market has since experienced significant volatility, many investors undergoing losses on BCH as prices have dropped. As the price had fallen below its level of support of around $ 2,400 in February 2020, liquidation events began to occur and the price continued to decrease.

Causes of liquidations

Several factors contribute to the probability of liquidations:

• Over-Saturation : When the price of a cryptocurrency is already high, it becomes more difficult for buyers to absorb the losses, resulting in increased sales pressure.

• Use with a high lever effect : cryptocurrencies with a high lever effect (for example, 100x or more) can amplify losses when prices decrease rapidly.

• Liquidity problems : Poor liquidity on the market can lead to a lack of purchase and sale activity, increasing the probability of liquidation.

Analyze BCH – A case study

Let’s analyze Bitcoin Cash using Historical CoinmarketCap Prix data:

| Date | Price (USD) |

| — | — |

| 01/01/2017 | $ 1.18 |

| 07/01/2017 | $ 64,804.71 |

| 02/20/2020 | $ 2,400.00 |

The BCH Prize culminated in July 2017, then collapsed, leading to a significant liquidation event. The price remained lower than its level of support for several months before rebounding.

Support and resistance levels

BCH’s price table reveals the key levels that investors should be aware:

* Support level : $ 2,400 (current price)

* Resistance level : 5,000 to $ 6,000 (historic highs)

Conclusion

Liquidation events are a natural consequence of the inherent volatility of the cryptocurrency market and increased commercial activity. Bitcoin Cash serves as a case study, highlighting the risks associated with high prices and bad liquidity. While investors continue to sail in this complex space, understanding the causes of liquidations is crucial to make informed decisions.

To alleviate risks, traders can use strategies such as:

* Diversification : Distribute investments over several cryptocurrencies to reduce exposure to one room.

* Sizing of positions

: Manage positions according to market volatility and use of use.

* Stop-loss orders : Define the stop orders to limit losses in the event of liquidation.

By being aware of the liquidation events and by understanding the factors that contribute to it, traders can make more informed decisions and reduce their exposure to risks.

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