Crypto Market Faces Significant Liquidation Losses
In the past 24 hours, cryptocurrency bulls have endured substantial losses, totaling at least $1.2 billion, as the market downturn from Monday intensified during the early hours of Tuesday in Asia. This decline has driven the price of Bitcoin (BTC) below $89,000, marking its lowest point since mid-November.
Excluding Bybit, other crypto exchanges are reporting an alarming rate of liquidations, averaging about one per second. This suggests that the overall losses in the market are significantly higher than the recorded $1.35 billion across both long and short trades. Futures linked to Bitcoin alone have seen over $530 million liquidated, while positions in Ether (ETH) have evaporated by more than $294 million. Additionally, Solana (SOL) futures witnessed a staggering loss of $112 million as the token plummeted by over 15%. Similarly, a 14% decline in both XRP and Doge (DOGE) contributed to cumulative losses exceeding $80 million.
Liquidations occur when exchanges forcibly close a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. This situation arises when traders fail to meet the margin requirements necessary to maintain a leveraged position, meaning they lack sufficient funds to keep their trades open.
Among the exchanges, Bybit has led the liquidation figures, suffering losses exceeding $600 million. This comes on the heels of the exchange fully recovering its assets following a $1.4 billion hack the previous week. Other significant losses were recorded on Binance with $300 million and OKX at $147 million.
As the market continues to falter, Nasdaq futures indicate further losses in technology stocks. Additionally, the strengthening of the Japanese yen has revived fears reminiscent of the risk aversion seen in August. Historically, investors tend to gravitate towards the yen during periods of economic instability or market turmoil, perceiving it as a safe haven, akin to the U.S. dollar or gold. This risk-off sentiment typically exerts downward pressure on high-risk assets such as Bitcoin and equities, as investors withdraw their funds from speculative investments to secure them in safer alternatives.