Over the past two days, more than US$2.5 billion longs have been liquidated as the crypto market sees yet another drop.
Traders woke up to a rough Monday as the crypto market saw up to double-digit percentage losses across the board. The sudden drop saw Solana, Cardano and Ripple (XRP) drop millions from their market caps, and Bitcoin (BTC) and Ethereum (ETH) plunge 10.4 and 14.7 percent respectively over the past seven days, according to data from CoinGecko.
What are Liquidations?
Liquidations occur when traders borrow excess capital from exchanges or brokerages to place bigger bets on the assets they trade, known as margin trading or trading futures.
Traders pay a fixed fee for borrowing while exchanges close out these positions at a predetermined price. If a trader’s collateral is equal to the loss on that position, a trade then becomes ‘liquidated’.
Of all the traders liquidated in the past few days, a shocking 91 percent of them were in the ‘long’ market. Being in the long market means traders had put on positions betting on higher asset prices.
According to data from Bybt, 136,690 traders were liquidated in the past 24 hours, while the total value of liquidations during that period reached over US$635 million.
Liquidations of US$236 million BTC and US$216 million ETH were recorded, while large-cap altcoins such as Solana (SOL) and XRP saw liquidations worth US$26 million and US$17 million respectively in that 24-hour period.
The largest single liquidation order took place on Bitfinex-ETH, to the value of US$14.52 million.
The dip has investors confused and fuming as the market drop comes only days after BTC had reached a “Golden Cross”. One Reddit user aptly described his dismay at the situation:
The golden cross is a chart pattern that is generally seen as an indicator of bullish price action to come, but this is not always the case. Given the market is more mature, diminishing returns ought to be expected.
Investors should approach with caution, and not rely on a single indicator to guide them. Many factors influence the price, none of which is predictable.
Just a ‘Bit’ Too Soon
September is proving itself to be a worthy opponent to those finding their way in the crypto market.
Investors are still reeling from the previous round of liquidations on September 7, in which over US$3.7 billion worth of cryptos were liquidated after BTC and other major altcoins tanked.
During that period, a total of 375,824 traders were forced out of the market after becoming overleveraged as sudden crypto price drops were experienced.
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