Bitcoin, Ethereum Plunge Triggers Near-$600 Million Crypto Long Flush

Overview

In the past 24 hours, Bitcoin, Ethereum, and various other digital assets have experienced a significant decline in value, leading to a long squeeze on derivatives exchanges. This event has resulted in nearly $600 million in liquidations, predominantly affecting long positions.

Market Movements and Liquidations

The recent downturn in the cryptocurrency market has triggered a wave of liquidations, particularly among long positions. According to data from CoinGlass, the total liquidations within the past day have surpassed $650 million, with approximately $584 million attributed solely to long positions. This figure represents nearly 90% of the total liquidations, highlighting the extreme volatility that traders are currently facing in the market.

Liquidation refers to the forced closure of open contracts that occur when they accumulate significant losses. In the case of long investors, this occurs when the asset’s price declines, whereas short positions are liquidated when prices rise. The specific price movement required to liquidate a position depends on the percentage threshold set by the trading platform and the level of leverage used by the trader. Positions with high leverage are typically the first to be liquidated during sharp price swings.

Notably, Ethereum has emerged as the largest contributor to this liquidation event, surpassing Bitcoin in terms of contracts affected. Ethereum saw over $235 million in liquidations, while Bitcoin accounted for $186 million. This disparity may be attributed to a more pronounced price drawdown for Ethereum in the recent trading session. Among altcoins, Solana experienced $37 million in liquidations, followed by XRP with $16 million and Dogecoin with $12 million. Interestingly, despite facing losses, Solana outperformed XRP and Dogecoin during this period.

Additionally, the recent decline in Bitcoin’s price has caused it to fall below a significant on-chain price level known as the Active Realized Price. This price level represents the cost basis of active participants on the Bitcoin network and is currently positioned at $87,900, which is above Bitcoin’s current spot price. As a result, active investors are now facing a net unrealized loss.

From author

The current situation in the crypto market underscores the inherent volatility and risks associated with trading digital assets. The significant number of liquidations, particularly among long positions, reflects the challenges traders face when navigating price fluctuations. The dominance of Ethereum in this liquidation event also raises questions about its current market dynamics in comparison to Bitcoin and other altcoins.

Impact on the crypto market

• The sharp decline in Bitcoin and Ethereum prices has led to widespread liquidations, indicating heightened market volatility.
• Long positions have been disproportionately affected, with a significant majority of liquidations stemming from this group.
• Ethereum’s role as the primary contributor to liquidations may suggest a shift in trading behavior or sentiment among investors.
• The drop below the Active Realized Price for Bitcoin may signal a shift in market confidence, as investors face unrealized losses.
• The overall market sentiment could be impacted as traders reassess their positions and strategies in light of recent volatility.