The cryptocurrency market has experienced significant turbulence over the past week, with a rapid decline and subsequent rebound in prices leading to a staggering $256 million in liquidation losses. This tumultuous period has left traders and investors on edge, seeking clarity amidst the chaos.
According to data from Coinglass, the initial wave of liquidations occurred on Monday. Market sentiment took a hit due to concerns that FTX, a prominent cryptocurrency exchange, might liquidate its crypto assets. This fear was not unfounded, as Bitcoin BTC 0.27%, the leading cryptocurrency, saw its price drop below the $25,000 mark for the first time since mid-June.
Ethereum ETH 0.85%, the second-largest cryptocurrency by market capitalization, also plummeted to its lowest price in six months. Other major cryptocurrencies followed suit, registering declines between 5% to 10%. This price action resulted in liquidations worth $167 million, with a whopping 90% of these being leveraged long positions.
However, the market’s dynamics shifted dramatically the following day. Traders, anticipating further declines, began shorting the market. Contrary to their expectations, Tuesday witnessed a short squeeze that rejuvenated digital asset prices. Bitcoin’s price surged by over 4%, reclaiming its position above the $26,000 threshold by early Wednesday. This unexpected rally wiped out leveraged positions valued at $89 million, predominantly from short sellers.
Several factors might have contributed to this week’s market volatility. Recent news highlighted a security breach at the Hong Kong-based cryptocurrency exchange, CoinEx Global. The hack resulted in an estimated loss of $43 million in cryptocurrencies.
Furthermore, regulatory pressures continue to mount on crypto exchanges. Binance.US, the American arm of the global crypto exchange Binance, has been under the spotlight. The Securities and Exchange Commission (SEC) initiated legal proceedings against the company in June for alleged violations of securities laws.
