A substantial number of liquidations in the market resulted in the elimination of more than $200 million worth of long positions. Due to the sudden increase in volatility, traders who were heavily leveraged faced significant losses, especially in the realm of alternative cryptocurrencies.
Leading digital assets such as Ethereum [ETH], Solana [SOL], and others witnessed sharp declines, triggering a series of forced liquidations.
Amid negative Funding Rates and a sense of uncertainty prevailing in the market, traders are questioning whether this is just a temporary setback or a sign of more profound issues ahead.
The liquidation incident: What transpired?
Recent data reveals that within the last 24 hours, total liquidations amounted to $268 million, with an overwhelming $217 million stemming from long positions.
Liquidations take place when traders utilizing leverage are compelled to close their positions as their losses surpass their margin limits.
The blend of heightened leverage and increased market volatility created an ideal scenario for a liquidation squeeze.
Within the last hour alone, liquidations in the market reached $3.76 million. Out of this, $1.03 million was from long positions and $2.72 million from shorts. In a four-hour span, liquidations surged to $51.58 million.
Most of this figure ($43.81 million) originated from long positions. The preceding 12 hours were even more brutal, with the total liquidations hitting $196.20 million, out of which $173.68 million were from long positions.
During the 24-hour period, the most significant wipeout occurred, with total liquidations reaching $268.26 million, encompassing $217.20 million from long positions and $51.06 million from shorts.
Altcoins Plunge: Which assets suffered the most?
While Bitcoin [BTC] usually leads in liquidations, this time around, Ethereum and other alternative cryptocurrencies bore the brunt. ETH experienced the biggest blow, accounting for $56.55 million in liquidations.
Solana closely followed with $33.59 million, facing the sharpest decline among top assets.
Ripple[XRP], BAN, Dogecoin [DOGE], and BTC also incurred substantial losses, with Bitcoin witnessing liquidations amounting to $29.76 million.
The liquidation heatmap outlined below offers a detailed breakdown of the impact on different assets.
Significance of the Event: Shifting Market Sentiment & Trend
This wave of liquidations signifies a notable change in market sentiment. With Funding Rates turning negative, it indicates a more cautious approach from traders, with the rise of short positions.
Historically, such shakeouts either serve as a reboot for the market, enabling healthier price movements, or act as a precursor to more profound corrections.
Irrespective of what unfolds next, the sudden liquidation of leveraged positions underscores the dangers of excessive speculation in the cryptocurrency domain.
Whether prices stabilize or further plummet, the recent volatility serves as a strong reminder of how swiftly sentiment can shift in this highly leveraged market.