A sudden drop in the cryptocurrency market erased over $600 million in leveraged long positions, causing significant turmoil for traders. On 5 August 2024, Bitcoin fell steeply, dropping to $52,500. This 10% decline from $58,350 happened in under two hours, marking a crucial decrease in the market.
According to TradingView data, Bitcoin has lost some of its value but is now back to $54,384. This gone-down meant that BTC was below the $53,000 mark for the first time since 26 February 2024, when the price skyrocketed after the approval of Bitcoin spot ETFs in the USA. On the other hand, Ether (ETH) experienced a rapid decline as well, decreasing by 18% from $2,695 to $2,118 during that period. ETH has shown some signs of recovery and is now at $2,358.
Bitcoin Liquidation Hits $231M
The rapid decline has caused the liquidation of more than $740 million in leveraged positions across the cryptocurrency market in the last 24 hours, with $644 million in leveraged longs removed, as per CoinGlass data. Traders who wanted leveraged revelation to the Ether were the most affected, as they lost over $256 million in ETH longs, while the remaining $231 million in Bitcoin longs were effectively closed.
The rise in open interest in ETH over the last few months has been caused by traders coming to the asset, particularly the approval of spot Ether ETFs in the U.S. This increased interest, however, has been significantly exposed to the recent decline in the market for ETH traders.
The significant drop in Bitcoin asset costs coincided with the significant sell-off in the Japanese stock market, where the Nikkei 225 index was down 7.1% during early trading hours. The country’s central bank’s decision to hike interest rates further aggravated this drop, so on August 2, the most terrible result of Japanese bank stocks was recorded since 2008.
The latter market turmoil has been associated with weak job data in the United States, slowed growth among leading tech companies, and worries about mass selling by crypto trading firm Jump Crypto. In the last three days, the total crypto market capitalization recorded a then-lost $500 billion shrank, marking the biggest 72-hour wipeout in over a year.
The most recent market upheaval is a stark reminder of cryptocurrencies’ unpredictable nature and a serious deterrent to leveraged trading. Besides high volatility and market uncertainty, traders are still compelled to analyze the factors leading to sudden radical price movements and adjust their strategies accordingly.
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