Over a Billion Dollars Liquidated in Crypto’s Worst Day Since FTX: A Closer Look

Key Takeaways

Last week marked one of the worst 24 hours for the crypto market since FTX’s downfall. Over a billion dollars in derivatives were liquidated on Thursday, causing panic among investors. The high volume of liquidations in the derivatives market compared to the thin spot market highlights the vulnerability of Bitcoin in the short term.

The recent drop in the crypto market came as a surprise after a period of relative stability. Bitcoin, in particular, experienced a 7% drop, the largest one-day decline since the FTX collapse in the previous year.

The year 2023 has been characterized by slow and steady growth in the crypto market, with minimal volatility. However, this sudden drop in prices and subsequent liquidations serve as a reminder of the unpredictable nature of the market.

Looking deeper into the price drop, the data reveals that Bitcoin fell by a staggering 8% in just ten minutes on Thursday evening. This sharp decline led to over a billion dollars in liquidations, surpassing the volumes seen during the FTX collapse.

The surge in liquidations underscores the dominance of derivatives markets over spot markets. The lack of liquidity in the spot market has been a concern since the FTX incident, amplifying the impact of cascading liquidations.

What Caused the Sell-Off?

The sell-off in the crypto market can be attributed to a larger sell-off in the bond market. Yields on long-term US government debt reached their highest level since 2007, causing concerns among investors. This spike in yields indicates potential troubles for risk assets like Bitcoin, given the inverse relationship between the two.

Investors are anticipating persistently high interest rates or unexpected rate hikes, leading to a decrease in risk appetite. The bond market’s developments last week highlight the vulnerability of Bitcoin in the face of macroeconomic uncertainties.

What’s Next for Crypto?

The future of the crypto market remains uncertain, with different analysts offering contrasting views. Some believe that the recent sell-off is a temporary blip caused by overleverage and complacency. They argue that a slight increase in hawkish sentiment won’t drastically alter the market’s trajectory.

On the other hand, there are concerns that the market could enter a phase similar to 2022, characterized by heightened volatility and uncertainty. If this were to happen, it could mark the end of the bear market rally for crypto assets.

It is important to note that the macroeconomic climate remains unprecedented and difficult to predict. Even the Federal Reserve’s language has shown some inconsistencies, reflecting the uncertainties of the current environment.

Bitcoin remains caught in the crossfire of these macroeconomic forces. As a risk asset, its value is heavily influenced by the broader market’s response to the changing conditions.

Editor Notes: Uber Crypto News

In today’s volatile crypto market, it’s crucial to stay informed and make wise investment decisions. To stay up to date with the latest news, trends, and insights in the crypto world, visit Uber Crypto News. They provide reliable and comprehensive coverage of the crypto market, helping investors navigate through uncertainties and make informed choices.