In a dramatic turn of events for the cryptocurrency market, overleveraged traders faced significant setbacks as nearly $2 billion was liquidated in one of the largest market flushes of the year. In just 24 hours, more than 370,000 positions were liquidated, resulting in approximately $1.8 billion in losses, as reported by CoinGlass.
The liquidation wave primarily targeted long positions in key cryptocurrencies such as Ether (ETH) and Bitcoin (BTC). As these assets grappled with price declines, the overall market capitalization tumbled by over $150 billion, dipping to a two-week low of $3.95 trillion. Bitcoin fell below $112,000 while Ether dropped below $4,150, marking its most substantial pullback since mid-August.
Despite a brief recovery with major cryptocurrencies finding temporary support, many analysts have warned of the potential for further downturns, drawing parallels to previous September corrections. Long positions for ETH and BTC accounted for the bulk of the liquidations, highlighting the risks associated with excessive leverage in the market.
According to Real Vision founder Raoul Pal, such liquidations are not uncommon and often occur as traders become overly optimistic in anticipation of a market breakout. “The crypto market tends to see a flurry of leveraged longs before a significant move, which can lead to widespread liquidations if the breakout fails initially,” Pal noted. This trend has been echoed throughout the year, with large liquidation events occurring in late February, early April, and early August, each time leading to significant market corrections.
Some market analysts suggest that the recent flush was exacerbated by an “excessive imbalance” in altcoin leverage relative to Bitcoin. Researcher “Bull Theory” highlighted that Ether’s liquidations surpassed $500 million, more than double that of Bitcoin, indicating a precarious situation among traders heavily invested in altcoins. “When the leverage in altcoins becomes highly skewed, the market reacts vigorously to any downturn, leading to cascading liquidations that purge weaker positions,” the researcher explained.
Nassar Achkar, Chief Strategy Officer at CoinW, remarked that this market flush could represent a short-term adjustment rather than a fundamental shift away from the ongoing bull market cycle, as future easing trends may remain favorable for risk assets like Bitcoin.
Market analyst Tony Sycamore from IG noted that Bitcoin’s recent price movements have not been closely correlated with traditional markets or gold, suggesting that the current volatility may be attributed to technical factors. He believes that a potential dip into the $105,000-$100,000 support zone, which includes the pivotal 200-day moving average at around $103,700, could serve to eliminate weaker hands from the market while creating a solid buying opportunity as the year progresses.
Historically, Bitcoin has faced challenges in September, having declined in eight out of the past thirteen months during this volatile period. However, despite the recent downtrend, Bitcoin remains up approximately 4% so far in September and has historically seen improved performance in what cryptocurrency enthusiasts refer to as “Uptober.”
This large-scale liquidation event serves as a critical reminder to traders of the inherent risks associated with overleveraged positions in the volatile cryptocurrency market. As the dust settles, market participants are watching closely to see how the scenario will unfold in the coming weeks.
