$328M in Crypto Liquidations Spark Market Sell-Off Fear

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The cryptocurrency market is undergoing a severe upheaval, resulting in $328 million in liquidations and pushing traders to the brink. Notably affected are major alternatives such as Ethereum ($3014), Solana ($176.7), and Cardano ($0.92). Over the past week, all three have experienced double-digit percentage losses. In contrast, Bitcoin ($91,450) has shown more resilience, managing to maintain its position relatively better despite a 3.8% volatility within the last 24 hours. Its market cap stands at $1.81 trillion with a daily volume of $63.22 billion.

Crypto Liquidation Grows As Bitcoin Stands Steady

As per data from Coinglass, a whopping $328.45 million worth of trades were liquidated on centralized exchanges within a 24-hour period. Traders who had placed long positions, hoping for price increases, suffered losses totaling $262.41 million. This unfortunate event left many optimistic traders with substantial financial losses.

Short sellers, who make money when prices decrease, suffered a loss of approximately $66.04 million. This indicates that the current selling spree is advantageous for liquidation to those anticipating price drops. The magnitude of this selling spree highlights how vulnerable the market has become under escalating external pressures, suggesting its instability.

Ethereum (ETH) took a significant hit, falling by 5% in just one day and losing more than 14% of its value for the week. Similarly, Solana (SOL) and Cardano (ADA) experienced steep declines, dropping 17% and 16%, respectively, during the same timeframe.

The sharp drop-off wasn’t isolated to only a few cryptocurrencies. Instead, the entire alternative coin market experienced substantial losses, indicating broad unease among investors.

Despite other digital currencies faltering, Bitcoin stood firm. Over the last day, it experienced a minor dip of just 2%, while week-on-week, this figure reached 6%. This robustness has financial experts musing that major institutions and influential players could be the foundation supporting Bitcoin’s stability.

The proportion of the entire cryptocurrency market controlled by Bitcoin has risen to 54.8%, while Ethereum’s share has decreased to 11.3%. This suggests that more people are favoring Bitcoin as a safe choice during uncertain times, as compared to Ethereum.

Although we’ve experienced significant setbacks, there’s a glimmer of hope. Historically, long-term investors have seized opportunities to invest at reduced prices when short-term traders decide to exit, which is often the case during periods of market downturn.

These market veterans see dips like this as opportunities, not disasters. 

What’s Behind the Panic? Macroeconomic Forces at Play

Despite the progress, obstacles persist. The U.S. dollar currently holds considerable strength, and increasing Treasury yields are making riskier investments such as cryptocurrencies less appealing. This is due to the fact that a stronger dollar makes digital assets more costly for foreign investors, negatively impacting crypto markets.

The difficulties in handling cryptocurrency liquidations are exacerbated by concerns over impending economic data releases. Market players are keeping a keen eye on the Federal Reserve, with many anticipating that interest rates will remain around 4.25%-4.5% for much of 2025.

However, optimism over potential interest rate decreases is dwindling, and Bank of America has issued a warning suggesting additional increases might occur. This ambiguity contributes to the pessimistic sentiment prevailing in both the cryptocurrency and conventional marketplaces.

Key stock indexes such as the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite are experiencing strain. With anticipation building around imminent inflation figures, Bitcoin is set to undergo a significant test of its standing as a protective asset against inflation.

If economic conditions deteriorate, Bitcoin might face a critical juncture. This digital currency may serve as a refuge for investors during tough times, or it could be negatively impacted by the challenges faced by other cryptocurrencies. At present, investors seem to be opting for reduced exposure to riskier assets.

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2025-01-13 20:04