The crypto markets experienced nearly $900 million in liquidations at the week’s start, heavily impacting overleveraged long positions following a steep correction in bitcoin (BTC) and ether (ETH).
ETH traders faced the most significant losses, with $320 million in forced liquidations, compared to $277 million for bitcoin. Additionally, Solana’s SOL, XRP, and Dogecoin combined saw around $90 million in liquidations, as reported by Coinglass. This sell-off occurred as ETH dropped from $4,700 to approximately $4,400, while BTC declined to $110,200, reflecting the downturn in the S&P 500.
“This sudden shift seems primarily due to overleveraging, especially after ETH’s recent price surge, combined with an overnight decline in the S&P 500, which negatively impacted risk assets overall,” noted a trader’s memo from Derixe.xyz.
Following this, volatility increased significantly. Daily BTC volatility surged from 15% to 38%, while ETH’s jumped from 41% to 70%, according to data from Derive.xyz. This increase indicates that traders currently view ether as a riskier investment, as its price increases attract more leverage, leading to quicker forced liquidations when the market shifts.
The options market took a defensive stance, with the 25-delta skew turning negative for both major cryptocurrencies, marking the strongest inclination towards put options in two weeks.
The market reset has traders focusing on key round-number levels as potential pressure points. The implied probability for BTC to reach $100,000 by the end of September increased to 35%, up from 20% last week, while ETH is now assessed to have a 55% chance of revisiting $4,000, based on market pricing.
This disparity between the two major cryptocurrencies is also visible in futures and volatility data. CME statistics reveal a record number of short positions in ETH futures, likely related to hedging surrounding digital asset tokenization (DAT) flows or funding-basis arbitrage.
“BTC implied volatility dropped to new all-time lows after Powell’s remarks, which was somewhat unexpected, resulting in a significant divergence from a still-increasing ETH implied volatility,” stated Augustine Fan, head of insights at SignalPlus, in a communication to CoinDesk.
As GDP data is set to be released on August 28 and U.S. unemployment figures in early September, traders are preparing for further market fluctuations. Although leverage may have diminished, the current setup suggests that volatility could persist, particularly for ETH, which appears to be more stretched and concentrated in its positioning compared to bitcoin.
Read more: Massive $14.6B Bitcoin and Ether Options Expiry Shows Bias for Bitcoin Protection
