In the wake of the correction of recent days, the crypto market recorded more than $1 billion in liquidations on Thursday. While altcoins are particularly affected, what are the elements that can explain this decline?
The crypto market records numerous liquidations
Since Wednesday, the crypto market has undergone a correction, notably seeing the price of Bitcoin (BTC) rise from its all-time high of more than $108,000 to $96,800 today.
Although the percentages involved may seem significant, they nevertheless remain relatively common within an ecosystem accustomed to volatility. However, liquidation data suggests something of a surprise effect with more than $1 billion in liquidations on centralized platforms on Friday alone.
In terms of distribution, the observation is clear: $844.36 million liquidated on buying positions compared to $166.59 million for selling positions.
Where the data from said liquidations is interesting is at the level of the assets concerned. Certainly, BTC is leading the way over the last 24 hours, but the heatmap below shows that ETH follows closely and altcoins weigh heavily in the balance :
Heatmap des liquidations crypto
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Over 24 hours, the total crypto capitalization lost 6.4% according to CoinGecko data and now stands at $3.5 trillion.
Among the biggest drops in the top 10, ETH has fallen sharply, dropping 7.7% since yesterday. In just 4 days, the asset went from 4,100 to less than 3,400 dollars:
ETH price in H4 data
Still in the top 10, SOL lost 7.4% in 24 hours, 11.8% for DOGE and 9% for ADA.
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How to explain this decline?
Several lines of thought can shed light on this decline. With regard to BTC specifically, it should be remembered that it has appreciated significantly since the election of Donald Trump and that the $100,000 level is far from trivial. Thus, a short-term correction can make it possible to delay before new peaks.
Then, some news in recent days may have been perceived negatively, such as Nayib Bukele’s concessions to the IMF or Jerome Powell’s comments, although in fact, this news is not fundamentally negative.
Here, we are therefore faced with a BTC which, like its outperformance over the last 2 years on the market, shows some resilience against altcoins. Moreover, the dominance of BTC has started to rise again since December 8, and now reaches 52.25% of the total crypto capitalization.
While profit-taking cannot be ruled out, a temporary panic is also an entirely likely scenario.
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However, it should also be emphasized that Bitcoin ETFs had their biggest day of withdrawals with nearly $672 million in net outflows. A risk aversion of institutional investors in the face of a broader macroeconomic environment must therefore also be considered.
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Sources : Coinglass, TradingView
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Since 2021, I have devoted my free time to seriously educating myself on cryptocurrencies in order to acquire maximum knowledge and credibility. I often have the opportunity to conduct interviews with influential figures in the blockchain industry. I also conduct in-depth analyzes on Web3 themes to offer exclusive content to Cryptoast readers.
Vincent Maire
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