Crypto Market Liquidations: A Major Downturn
Crypto liquidations within the past 24 hours have reached a staggering $825 million, primarily driven by long positions. This alarming development highlights a significant market crash as major altcoins start to decline in value.
Summary of the Current Situation
On October 30, liquidations across the crypto landscape totaled $825.4 million, inching dangerously close to the $1 billion mark. Long positions accounted for the majority of these liquidations, contributing $656.7 million to the total, while short positions made up just $168.9 million.
Bitcoin has been at the forefront of this liquidation wave, experiencing roughly $310.3 million in long liquidations, dwarfed only by its short position liquidations of $59.2 million. In total, the market cap saw a decline of 1.6%, dropping to $3.8 trillion as Bitcoin, Ethereum, and other prominent altcoins such as Solana and XRP faced sharp declines.
The Cause Behind the Liquidation Surge
The recent downturn can be attributed to various factors, including post-Fed rate cut uncertainty, excessive leverage, and waning investor enthusiasm—even in the wake of new ETF launches.
In the most recent hour alone, the crypto market lost nearly $10 million in liquidations. Bitcoin liquidations dominated the scene, accounting for about $2.88 million, while Ethereum followed closely behind with $2.41 million. Other altcoins collectively reported $815,650 in liquidations, with Solana witnessing $481,430 in liquidations as well.
Source: Coinglass
The Diminishing Market Cap
The mass liquidations have taken a toll on the overall crypto market capitalization, which has fallen by 1.6%, pushing it further below the $4 trillion threshold. As of October 30, the total market cap sits at $3.8 trillion, while the 24-hour trading volume remains around $192 billion.
This downturn was exacerbated by a series of major cryptocurrencies turning red in value. Bitcoin traded at the edge of $110,000, marking a 2.4% decline over the past 24 hours. Ethereum, once riding high at $4,000, has slipped 2.5% to $3,899.
Even with the recent launches of two Solana ETFs, Solana saw a drop, trading below $200 after briefly peaking at $201. Currently, it’s down 0.9%, inching closer to the $190 mark. XRP has been hit hard too; it has lost approximately 3.5%, now trading at $2.56.
Smaller altcoins haven’t been spared either, experiencing varying levels of losses. Pi Network and Aster deteriorated by 2.1% and 5%, respectively, while Dogecoin stood at around $0.189, having fallen 2.1% in the last day.
Understanding the Market Crash Dynamics
The current landscape of the crypto market is significantly impacted by macroeconomic pressures, inherent vulnerabilities, and the dynamics of leveraged trading. Amid rising uncertainty regarding monetary policy, non-yielding assets like cryptocurrencies are seen as increasingly unattractive to investors.
Following the Federal Reserve’s decision to lower interest rates by 0.25%, which was in line with pre-event expectations, many investors engaged in the classic strategy of “buy the rumor, sell the news.” This often leads to inflated prices prior to an event, followed by a market correction afterward as momentum fades.
Additionally, the crypto market’s heavy reliance on leverage and thin liquidity creates a precarious situation. With a large portion of trading volume stemming from derivatives, traders can achieve significant exposure with minimal capital. Consequently, as prices dip, liquidation cascades occur, prompting forced closures of leveraged long positions, which in turn drives prices even lower and triggers additional liquidations.
Despite the recent introduction of crypto ETFs, including the Bitwise Solana Staking ETF, Grayscale’s Solana Staking ETF, and various others, the expected positive momentum seems to have evaporated. Instead, many of these tokens have experienced declines rather than the anticipated uplift.
This tumultuous environment illustrates the fragile balance the crypto market currently maintains, laying bare the challenges and pressures that investors are facing in a highly volatile space.
