Fears of BNB liquidations loom despite bullish sentiment

Journalist

Posted: February 14, 2024

• Traders targeting $340 could be liquidated if BNB retraces.
• If the Funding Rate becomes extremely negative, the price might head toward $400.

The price of Binance Coin [BNB] joined other cryptocurrencies as the broader market continued to climb. At press time, BNB’s price was $326.93.

But if AMBCrypto’s observation is right, traders with long positions face a liquidation risk.

For those unfamiliar with the crypto terrain, liquidation occurs when a leverage position is automatically closed. This could be because the margin balance of the traders is insufficient.

It could also be because the price of the asset involved has breached the stop-loss area.

Not the time for high-leverage bets

At press time, AMBCrypto’s analysis of BNB’s Liquidation Levels showed that there was a cluster of liquidity from around $329 up to $340.

Liquidation Levels are estimated price points where large-scale liquidations might take place. This region mentioned is colored blue in the chart below.

Source: HyblockCapital

However, this does not mean that BNB would not hit the prices in the short term. However, for traders who plan to open long positions, it might be better to use low leverage.

Using leverage between 25x to 100x might cause a wipeout.

Data from HyblockCaptial also showed signals from the Cumulative Liquidation Level Delta (CLLD). The CLLD is the sum of the difference between all long liquidation levels and short liquidation levels.

As of this writing, AMBCrypto found that the CLLD in BNB’s case was positive.

In most cases, this position means that the coin could head to a full retrace while indicating a bearish bias. Should this be the case, BNB’s price might fall to $315.

In terms of the volume, on-chain data showed that it climbed $1 billion. The increase in volume could be linked to rising interest in the coin.

BNB might rebound but not now

If the coin price continues to rise alongside the volume, BNB might rise above $327 in the short term.

However, if the price reverses downwards while the volume jumps, BNB might lose hold of the bullish momentum. Therefore, the value could correct as much as 10% in the coming weeks.

When it comes to the Funding Rate, we discovered that the metric was negative at press time. According to Santiment, Binance Coin’s Funding Rate was -0.008%.

Funding Rate is the cost of holding an open position in the derivatives market. If the metric is positive, it means the perp price is trading at a premium compared to the spot price.

Source: Santiment

How much are 1,10,100 BNBs worth today?

But since BNB’s Funding Rate was negative at press time, it suggested that the perp price was trading at a premium. Despite the negative reading, the reasonable inference here was that shorts were not aggressive.

As such, a significant bounce might now be likely. However, if the metric becomes extremely high and possibly hits -0.01%, BNB’s price might rebound. In this instance, a move toward $400 could be plausible.