The crypto currency market recently experienced a severe downturn which brought on a staggering USD 580 million in liquidations as Bitcoin, Ether, Solana and Dogecoin all suffered significant losses. This event reminds investors of the market's volatility and the far-reaching implications of major financial manoeuvres and economic events.
The crypto market took a sharp nosedive with Bitcoin falling by 8% to dip below USD 54,000 a level not seen since February. Ether, Solana and Dogecoin also plunged with Ether dropping more than 10%, Solana falling by 8% and Dogecoin plummeting nearly 18%.
This sudden crash was triggered by movements from a Mt. Gox-linked wallet which spooked traders during early Asian trading hours causing a market wide spiral.
According to data from Coinalyze this downturn resulted in over USD 580 million in liquidations tied to long positions marking one of the largest liquidation events of the year. Long positions on Bitcoin and Ether alone accounted for over USD 380 million in losses. The most significant single liquidation order occurred on Binance, where an Ether trade valued at USD 18.4 million was forcefully closed.
Liquidations happen when an exchange forcefully closes a trader’s leveraged position due to insufficient funds to maintain the trade. This mass liquidation event also saw open interest drop by 12% indicating a withdrawal of money from the market.
The market crash is closely linked to the movements of Bitcoin associated with the defunct centralised exchange (CEX) Mt. Gox. The exchange which suffered a catastrophic hack in 2014 has begun moving large amounts of Bitcoin in preparation for creditor repayments.
The repayments are scheduled to start this month and will be made in Bitcoin and Bitcoin Cash, potentially adding selling pressure to these markets. Trading firm QCP Capital anticipates a subdued third quarter for Bitcoin as the market remains uncertain about the impact of these repayments.
Analysts have warned that Bitcoin's recent slide below $58,000 could signal a more extended correction. A senior market analyst at FXPro stated that Bitcoin's drop below its 200 day moving average might indicate a downturn. Pointing out that a further 12% drop to around USD 51,500 is more likely than a rebound to USD 65,800, based on Bitcoin's current trajectory.
Just three days into the month Bitcoin has already seen an 8.6% decline which has been driven by fears over the impending Mt. Gox payouts. These repayments are expected to introduce additional selling pressure as creditors might cash out their tokens. K33 research highlighted that concerns over the Mt. Gox repayments have been weighing heavily on Bitcoin's price in recent days.
The impact of Bitcoin's downturn has rippled across the broader crypto market. The total market capitalisation dropped to a February low falling below USD 2.17 trillion. Leading altcoins like Solana, Dogecoin, Ripple and Shiba Inu also experienced significant losses contributing to the massive liquidation figures.
other factors have also influenced the market's recent performance. The German government’s decision to liquidate USD 150 Million worth of its confiscated Bitcoin holdings has added further pressure. Moreover the upcoming US presidential elections in November have introduced additional uncertainty which has contributed to market volatility as U.S candidates remain differential on their treatment and stance on decentralised assets.
Federal Reserve Chair Jerome Powell recently described the current period as "critical," citing unsustainable deficit levels. This statement has added to the existing market fears and contributing to the recent crypto crash. The Bitcoin market in particular has struggled over the past month by dropping almost 15% amid fears of a "true correction."
Despite the current bearish sentiment some analysts remain optimistic about Bitcoin's long term prospects. Fundstrat’s Tom Lee projected that Bitcoin could surge to USD 150,000 by the end of the year once the overhang from the Mt. Gox repayments is resolved. Galaxy CEO Michael Novogratz warned earlier this year that a Bitcoin correction was imminent before it could climb higher, suggesting a floor of USD 50,000.
The recent crash in the crypto currency market serves as a reminder of the volatility and the complex interplay of factors influencing digital asset prices that are now a much more global market.
The movements related to the Mt. Gox repayments, coupled with broader economic uncertainties have created a challenging environment for crypto investors. While some analysts hold onto bullish projections the immediate future remains uncertain with significant risks and potential for further market disruptions.
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