The secret of the funds flow behind the Bitcoin liquidation

In today's financial market, Bitcoin, as a virtual currency, often attracts attention and discussion from investors around the world due to its price fluctuations. However, with the sharp fluctuations in Bitcoin prices, liquidation has occurred frequently, and many investors are facing huge losses. So, where did the "missing" funds go after Bitcoin liquidated? This article will explore this issue in depth, analyze the mechanism of liquidation and its impact on the market, and reveal the deeper flow of funds behind it.

Bitcoin liquidation usually refers to the situation in leveraged trading where investors are forced to close their positions because the margin in their accounts is insufficient to support their positions due to the sharp drop in market prices. Simply put, leveraged trading allows investors to control large assets with small amounts of money. Although this can amplify profits, it can also aggravate losses when the market is against the wind. For example, an investor bought $10,000 worth of Bitcoin with 10x leverage. When the price of Bitcoin fell to $9,000, the net value of his account would be lower than the maintenance margin, eventually leading to liquidation.

After the liquidation, the flow of funds is a complicated process. First, the forced liquidation operation will sell the Bitcoin held by investors at the market price. Usually, the market price in this case will be lower, resulting in greater losses when selling. At this time, this part of the funds will not disappear, but will be transferred to the liquidity pool of the exchange. The flow of these funds is actually a reflection of the supply and demand relationship in the market.

In this process, the destination of funds can be analyzed from several aspects. First, some of the closed Bitcoins may be purchased by other investors at a lower price. This phenomenon is very common in the market. When the price falls back, many investors will choose to "buy the bottom" and try to enter the market at a low price. At this time, the liquidated funds are transferred to new investors who are willing to take risks, forming a process of redistribution of funds.

Secondly, the exchange itself will also benefit from the liquidation. The exchange usually charges transaction fees, and when the liquidation occurs, the exchange's revenue will also increase due to the surge in trading volume. Although this part of the profit does not come directly from the funds of the liquidated investors, it is an indirect benefit brought by the increase in market activity. In addition, the exchange may also reduce its own risks through hedging mechanisms to ensure the safety of its funds.

Furthermore, short sellers in the market will also profit from the liquidation. Short selling is an investment strategy where investors borrow assets and sell them in the hope of buying them back at a lower price in the future. The occurrence of liquidation often exacerbates the downward trend of the market, and short sellers can make profits in the process. In this way, the funds lost by investors who originally lost money in the market are actually gained by investors who hold the opposite view in the market.

However, the impact of margin calls is not only a change in the flow of funds, but also a deeper impact on market sentiment and confidence. Every margin call event will cause market anxiety to a certain extent, and investors' panic may lead to more selling, thus forming a vicious cycle. In this case, market liquidity may be affected, and even cause greater price fluctuations.

In the process of investing in Bitcoin, many investors often hold the idea of "getting rich in the short term", however, the real situation of the market is volatile. Take 2021 as an example, the price of Bitcoin fell from $60,000 to $30,000 in just a few months, and many investors suffered heavy losses due to blindly chasing the rise. The liquidation is not only a technical problem, but also a psychological and strategic mistake.

For investors, it is crucial to understand the mechanism of liquidation and the flow of funds behind it. First, when participating in leveraged trading, investors need to be clear about their risk tolerance and set stop-loss positions reasonably to prevent liquidation caused by market fluctuations. Secondly, investors need to continue to learn market knowledge, improve their investment capabilities, and avoid making wrong decisions due to lack of experience.

From a broader perspective, the market for Bitcoin and other virtual currencies is still developing, and more regulatory policies and market mechanisms may emerge in the future. As the market matures, the phenomenon of liquidation may gradually decrease, but investors' risk awareness and market judgment ability are still indispensable.

In summarizing the above views, we can see that the flow of funds after the Bitcoin explosion is a complex process, involving market supply and demand, exchange revenue, short sellers' profits, etc. Behind every explosion is the reflection of market sentiment and the redistribution of funds. For investors, staying rational and enhancing risk awareness is the best strategy to deal with market fluctuations.

In this ever-changing market, only a deep understanding and rational response can keep you invincible in the ever-changing investment world. Whether it is Bitcoin or other assets, investors need to be vigilant and act cautiously at all times to maximize the protection of their wealth.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Before answering this question, let me talk to you about what Bitcoin liquidation is. If you borrow money to buy Bitcoin, and the price drops to the point where the principal and the Bitcoin bought with borrowed money are only enough to pay back the borrowed money, it is a Bitcoin liquidation. Liquidation refers to the situation where the customer equity in the investor's margin account is negative under certain special conditions. Liquidation means that the loss is greater than the margin in your account. After understanding the meaning of Bitcoin liquidation, let's get back to the topic. Where did the money from Bitcoin liquidation go? Below, I will give you a comprehensive analysis of where the money from Bitcoin liquidation went.
 Where did the money from the Bitcoin liquidation go?
After the Bitcoin liquidation, the remaining funds after the company's forced liquidation are the total funds minus your losses, and generally there is still a part left.
Bitcoin is a common digital currency. Many users now use their spare money to invest in Bitcoin, but they face greater risks in the process of buying and selling. For example, the price of a Bitcoin is several thousand US dollars, and the fluctuation range is very large. It is difficult for ordinary users to accurately grasp the price trend.
Below, the editor of Coin Circle will tell you what to do when you encounter a Bitcoin liquidation?
1. Open a perpetual contract! In this case, there will never be delivery. The money you earn can be automatically delivered at 16:00 every day! All other trading software and trading contracts have a minimum delivery period of 7 days, and you cannot withdraw the money you earn. In this case, you can withdraw the money you earn at 16:00 every day.
2.5 to 50 times, preferably 6 times. One time is used to pay the handling fee. In this way, the position will be liquidated only when the fluctuation is 20%. Even if you make a mistake, you have plenty of time to slowly correct it! With perpetual contracts, as long as you live long enough, there will always be a day to get out of the trap! This means that the position will never be liquidated.
3. The amount of each order should not be too large, 5,000 is appropriate. If it is too large, it is easy to get excited and be targeted by the dealer.
4. Normally, short orders are placed. Every night, short orders are about 5%! At night, there are very few orders for Bitcoin! The main force and the dealer like to make big waterfalls at night. For example, short orders of one million on multiple contracts of Bitcoin, EOS, and Ethereum! In the middle of the night, 100 Bitcoins were suddenly sold. The price dropped by 5%. In this case, the loss is 5 coins, 350,000 yuan. And the harvest on the contract is tens of millions of yuan!
 Behaviors that cause Bitcoin liquidation:
1. Those who play all-in every time
There must be no dispute about this being the first. Some new investors love the thrill of playing all-in, and they play all-in whenever they have a position, which of course brings a feeling of complete defeat. Some people may ask? How can they still win? First of all, this is a wild gamble that throws oneself out without leaving any room for maneuver. Secondly, every time you play all-in, you will lose, and if you lose, you are out. Therefore, when playing a 100x perpetual contract, the first official suggestion is to control your position and try not to enter the market with a full position.
2. No stop-profit/stop-loss setting
This is the most common phenomenon of liquidation, which is related to the mentality of most investors. When they lose money, they are satisfied with just getting their money back, and when they make a profit, they want more. They are afraid of the pain of cutting losses, and they think that taking profits is too thin, so they stay in the market for a long time. The final result is likely to be that a wave of market will hit them, and it will end only when everything is blown up and there is no more fun. Therefore, it is very important to clarify your own take-profit/stop-loss points. It is a terrible thing to invest without your own bottom line and without looking at the market situation and relying on imagination.
3. Those who trade against the trend
A man who knows the current situation is a hero. In the overall bearish trend, it is a matter of playing with fire to make long positions in the band. Many coin friends who are shorting on the front hand and long on the back hand will encounter such entanglement. Don't let go of the market on both sides. When the general trend comes like a tiger coming down the mountain, you have already lost a lot if you want to run. It's okay to cut your losses decisively. If you keep dragging it out, you will directly drag down all your funds. Therefore, it is relatively safer to make short positions in the band with the trend.
4. Blind Follower
Follow the big guys and you will get the meat. Of course there is nothing wrong with this, but it is easy to make you over-reliant. Many times the market changes rapidly, and the big guys' emergency operations and temporary judgments are what you may not have. If the big guys have changed their strategies or made temporary operations, and you fail to catch up, you will suffer a big loss if you lack the ability to judge the market yourself.
5. Margin Adders
I have heard of a coin friend who had his account exploded 7 times in one night. This may seem like a cautious move, but actually it is a big mistake to add more margin. Increasing the margin can ensure safety, but every time it explodes, you have to start all over again, and you are wiped out by the market in batches. In the end, there is nothing left after the explosion, and you lose the capital to turn things around. Therefore, here is the art of setting the margin, which must be set within the safety line at one time.
6. Those who hold positions overnight
Those who dare to hold positions overnight are either confident or careless, and the latter is often the case. "Markets move at night", the cryptocurrency world likes to make big moves at night, and if you can still sleep soundly while holding positions, then the risk is definitely huge.
7. Those who are anxious to buy at the bottom
To buy at the bottom, you must first look at the bottom. Investors often refer to the previous price and think that they have definitely bought at the bottom. However, they do not know that the market is in waves, and the bottom you see may be the ceiling under the big market. The deeper you fall, the more you fall. If you don't cut your losses, you will be trapped in the eighteenth level of hell, and it is not far from a margin call.
8. The All-Catcher
It is impossible to catch all the market trends. Blindly entering the market will only use up your chips early, and when the market really arrives, it will be difficult for you to get out. Therefore, experts will wait for the opportunity and make a profit if they don't make a move.
9. The one who fights to the death
Under the current situation in the cryptocurrency circle, giving in is also a means of survival. In order to avoid liquidation, continuously adding margin to prolong life is also emotional. If you stick to the market, you may wait for a bright future, but you may also end up in a bottomless pit that you can never escape from. Therefore, it is also worth encouraging to cut losses appropriately.
Through the above introduction, I believe everyone has already understood the question of where the money from the Bitcoin liquidation went. The editor of Coin Circle kindly reminds that investors must learn the basic knowledge of the Bitcoin market in advance before trading Bitcoin. Investors can search for relevant information about Bitcoin speculation on the Internet and choose regular websites to learn about it. Generally speaking, investors mainly learn some basic concepts, professional terms, the development history of digital currencies, etc. to lay a foundation. If you want to know more relevant knowledge, you can pay attention to Coin Circle. The editor of Coin Circle will continue to update relevant reports later!