The crypto world is "awash in blood"; Monday's plunge was "the largest liquidation of the year."
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On Monday, the cryptocurrency market suffered a sharp sell-off, resulting in the largest leveraged long position liquidation event so far this year.
According to data provider CoinGlass, in the past 24 hours, positions of more than 370,000 traders were liquidated, totaling as much as $1.8 billion. This wave of sell-offs resulted in a loss of more than $150 billion in total cryptocurrency market capitalization, dropping to a two-week low of $3.95 trillion.
The market impact was immediate. The price of Bitcoin on Coinbase once fell below $112,000, while Ethereum dipped below $4,150—this was the most significant market correction since mid-August. Long positions betting on the rise of Ethereum and Bitcoin suffered the heaviest liquidation losses, and other altcoins were also generally hit hard. As of press time, Bitcoin has rebounded to $113,155.
Although major crypto assets have temporarily found support after the plunge and market sentiment has stabilized slightly, analysts warn that more volatility may occur in the future, referencing historical September market corrections.
Leveraged Trading is the “Culprit”
Analysts generally attribute this flash crash to excessive leverage by traders. Real Vision founder Raoul Pal pointed out that this is a frequent occurrence in the crypto market, summarizing:
“Before expecting a major breakout, traders will take on a lot of leveraged longs, but the first attempt often fails, causing everyone to be liquidated… Only after that does the real breakout happen, by which time most have exited.”
CoinGlass data confirms this is the largest long liquidation event so far this year. Similar liquidation events have occurred several times earlier this year in late February, early April, and early August, when the spot market lost hundreds of billions in a very short period. The commonality of these events is that excessive leverage amplifies market volatility and leads to a chain reaction of forced liquidations.
Some believe the severity of this liquidation is closely related to the imbalance of leverage in altcoins (especially Ethereum). Researcher “Bull Theory” pointed out that compared to Bitcoin, the leverage ratio in the altcoin market has become “excessively unbalanced.” Data shows that Ethereum’s long liquidation amount exceeded $500 million, more than twice that of Bitcoin.
“When the leverage ratio of altcoins reaches such extreme levels, the market does not ignore it,” said the researcher:
“A sharp drop will trigger chain liquidations. This is the market’s way of flushing out weak hands and resetting the game.”
Technical Pullback or End of the Bull Market?
There are divided opinions among analysts regarding the market’s future direction, but most tend to characterize this as a technical adjustment rather than the end of the bull market. CoinW’s Chief Strategy Officer Nassar Achkar stated that this liquidation “may be a short-term adjustment rather than a long-term structural shift in the bull market, as the future path of monetary easing is still favorable for risk assets like Bitcoin.”
IG market analyst Tony Sycamore expressed a similar view in an interview with Cointelegraph. He believes that Bitcoin’s recent decoupling from tech stocks or gold was “largely due to technical factors”; the market needs time to correct the enormous gains over the past 12 months and digest overbought readings. He added:
“Technically, a pullback to the $105,000–$100,000 support area is reasonable. This area includes the 200-day moving average at $103,700. This will wash out some weak-handed speculators, and I believe it provides a good buying opportunity for a year-end rally.”
Despite this week’s plunge, Bitcoin’s pullback from its historical high is currently only 9.5%, which remains shallow compared to major corrections in previous bull years.
Historically, September is typically a weaker month for the crypto market. In the past 13 years, Bitcoin has fallen in September in 8 of those years. However, despite the recent plunge, Bitcoin is still up about 4% so far this month.
Traders are now hoping for history to repeat itself. In stark contrast to the “September curse,” October is commonly called “Uptober” in the crypto community, typically a month of strong market performance.
Risk Warning and DisclaimerThe market involves risks, and investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular situation. Investment is at your own risk. ```