Escalation of Global Tensions Results in $500M Market Liquidation Amid Cryptocurrency Market Plunge
On the 2nd of October, the cryptocurrency market experienced a downturn, with the total market capitalization dropping by over 5% to $2.25 trillion. Bitcoin [BTC] faced significant selling pressure, falling to a seven-day low below $61,000. Alongside, most altcoins, including Ethereum [ETH], registered losses, with ETH declining by 6.5% to $2,473.
Other major cryptocurrencies such as Binance Coin [BNB] and Solana [SOL] also saw declines of 4.9% and 5.7%, respectively, while Ripple [XRP] dipped below $0.60 after a 3.6% decrease. Dogecoin [DOGE] was among the biggest losers in the top ten crypto list, plummeting by 9% to trade at $0.108.
Reflecting the market sentiment, traditional financial markets were affected as well, with Japan’s Nikkei 225 index witnessing a 2.5% drop, as reported by Google Finance.
Ripple Effect of Geopolitical Unrest on Crypto Markets
The recent spike in geopolitical tensions in the Middle East, triggered by Iran launching missiles towards Israel, played a pivotal role in the market downturn. This event heightened concerns among traders regarding the performance of high-risk assets.
During times of geopolitical uncertainties, investors typically seek refuge in safe-haven assets and move away from riskier options like cryptocurrencies. As an example, while crypto prices nosedived, gold only experienced marginal losses of less than 1%.
According to Coinglass data, more than $500 million worth of assets were liquidated in the past 24 hours, primarily targeting long positions amounting to $450 million. These forced liquidations impacted a substantial number of traders, surpassing 155,000 individuals.
The highest liquidation figures were seen in Bitcoin and Ethereum, with $140 million and $110 million respectively. Notably, a singular trader faced a massive liquidation of over $12 million on Binance.
Decline in Crypto ETF Investments
On the same day, U.S. spot Bitcoin exchange-traded funds (ETFs) witnessed significant outflows amounting to $242 million, marking the highest level since early September, as per SoSoValue data.
Among the major players, Fidelity’s Bitcoin ETFs recorded the largest outflow at $144 million. While other Bitcoin ETF products showed either minimal inflows or negative flows, the iShares Bitcoin Trust ETF remained positive with $40 million in inflows. Ethereum ETFs mirrored the negative trend with $48 million in outflows, the highest in over a week.
These outflows coincide with a downturn in market sentiment, as indicated by the Bitcoin Fear and Greed Index plunging to 42, its lowest level in more than two weeks, reflecting pervasive fear within the market.