Key Points
- The crypto market experienced over $875 million in liquidations following a drop in Bitcoin’s value.
- Bitcoin long liquidations hit a record high of $416 million.
The cryptocurrency market recently experienced a significant increase in liquidations. In the past day, over $875 million in leveraged long and short positions were wiped out. This marks the highest volume of liquidations since 2021.
According to data from Coinglass, long liquidations amounted to $702 million while short liquidations totaled $173 million. These liquidations impacted over 157,000 traders.
Bitcoin Long Liquidations
Traders who anticipated further gains in the value of Bitcoin [BTC] suffered the most losses. Long BTC liquidations reached $416 million. These positions were closed following a sudden increase in volatility, with the price dropping from over $100,000 to $92,000 in less than four hours.
Altcoins also experienced a slight increase in volatility. The price of Ethereum [ETH] fluctuated between $3,600 and $3,900, resulting in $85 million in liquidations. XRP and Dogecoin also saw significant liquidations.
Overleveraged Market and Liquidations
This sudden increase in liquidated trades and volatility may have been due to a forced correction following an overleveraged market.
Bitcoin funding rates reached a multi-month high, indicating that long positions were becoming increasingly dominant. However, when funding rates reach extreme levels, it often leads to a sharp move in the opposite direction. This resulted in a long squeeze, triggering forced selling and causing funding rates to drop.
Despite the recent correction, Bitcoin’s market value to realized value (MVRV) ratio indicates that there is still room for further gains. The MVRV ratio is currently at 2.5, suggesting that the asset is still fairly priced. A surge in the MVRV ratio past 3.5 will signal that Bitcoin has reached a local top. Traders should watch out for a further rise in this metric to overvalued levels.
