Cryptocurrency Market Faces Biggest Wave of Liquidations Since 2021

The cryptocurrency market has been rocked by one of the biggest sell-offs since 2021, with the total amount of positions closed exceeding US$ 1,76 billion in the last 24 hours. This movement strongly impacted altcoins such as Ethereum (ETH), Solana (SOL), Cardano (ADA) and Dogecoin (DOGE), which suffered significant drops, ranging from 6% to 12%.

Bitcoin (BTC) was not immune to the volatility. Despite finding support in the $94.000 region, the asset saw a significant drop, contributing to around $135 million in long liquidations. However, altcoins were the main contributors to the total volume of liquidations, with Ethereum standing out, which saw over $200 million in long positions closed.

Experts point out that the correction can be attributed to macroeconomic factors, including the rise in US bond yields, which generated nervousness in financial markets. In addition, movements by large investors, known as “whales”, amplified the selling pressure by liquidating substantial positions. This created a cascade effect, intensifying the price decline and forcing leveraged traders to close their positions.

this crypto crash will spark bull run frenzy https://t.co/5cPMR8LFKX

— Dan Gambardello (@cryptorecruitr) December 9, 2024

Recent data also shows that Ethereum futures funding rates have fallen to their lowest levels in weeks, indicating a potential unwinding of leveraged positions. Analysts suggest that this move could pave the way for a near-term price stabilization. Bitfinex noted that “removing excessive leverage is essential for a more balanced market, with prices able to find support and form a more sustainable base.”

Meanwhile, the altcoin market faces additional challenges. After a period of euphoria fueled by a significant increase in market capital, the correction highlights the sector’s fragility in the face of external shocks and speculative movements. CryptoQuant analyst Julio Moreno noted that the drop “reflects the impact of a massive sell-off in an overleveraged market, but it could also signal an opportunity for long-term investors.”

Another relevant aspect is the growing participation of institutional funds in cryptocurrency-related investment products, such as Bitcoin and Ethereum ETFs. These products have recorded positive net flows for eight consecutive days, totaling more than US$3,85 billion in inflows last week, the largest weekly value in history.

In the past 24 hours, 502,094 traders were liquidated over $1.47 billion! pic.twitter.com/c5FNGkZbhs

— Ali (@ali_charts) December 9, 2024

While the market has faced significant challenges, Bitcoin’s resilience in holding a key support range fuels expectations of a gradual recovery. As a result, investors are closely monitoring the market’s next moves, assessing buying opportunities and adjusting their risk strategies.