Leveraged cryptocurrency traders experienced liquidations nearing $2 billion on Monday in one of the year’s most significant market downturns, attributed by some analysts to technical factors rather than weakening market dynamics.
Over 370,000 traders faced liquidations totaling $1.8 billion in the last 24 hours, according to CoinGlass data.
The majority of these positions were tied to Ether and Bitcoin, with altcoins suffering heavily across the board.
The liquidations coincided with a decline in the total cryptocurrency market capitalization by more than $150 billion, dropping to a two-week low of $3.95 trillion as Bitcoin (BTC) slipped below $112,000 on Coinbase and Ether (ETH) dipped under $4,150, marking its largest retracement since mid-August.
While the immediate chaos seems to have subsided, with key assets establishing temporary support, there could be further challenges ahead based on past September corrections.
Traders Overleveraged: A Recurring Theme
Raoul Pal, founder of Real Vision, commented that such occurrences are frequent, noting that “the crypto market anticipates a significant breakout, amplifies long positions, then fails on the initial attempt, resulting in mass liquidations… only for the actual breakout to follow, sidelining many.”
Related: Year’s Largest Long Liquidation: 5 Key Insights for Bitcoin This Week
According to CoinGlass, this was the largest long liquidation event of the year, with similar occurrences noted in late February, early April, and early August, where spot markets rapidly lost hundreds of billions.
Critics Point to Altcoin Leverage
Researcher “Bull Theory” attributed the major sell-off to an “excessive imbalance” of altcoin leverage relative to Bitcoin. Liquidations for Ether exceeded $500 million, over twice that of long Bitcoin positions.
“When altcoin leverage reaches such extremes, the market reacts. A sharp downward movement triggers cascading liquidations, flushing out weak hands and resetting the landscape.”
Nassar Achkar, chief strategy officer at CoinW exchange, suggested that the market flushout “could signify a short-term adjustment rather than a fundamental shift in the long-term bullish trend, given that future easing paths remain favorable for risk-sensitive assets like Bitcoin.”
Possible Return to Support Zone
IG market analyst Tony Sycamore informed Cointelegraph that Bitcoin has recently shown little correlation with tech stocks or gold, attributing this to “largely technical factors,” indicating it may require more time to correct its strong gains from August’s $125k peak and to address overbought conditions.
“A retreat back into the $105/100k support zone, including the 200-day moving average at $103,700, appears logical. This would flush out some weaker hands and latecomers, setting up an attractive buying opportunity for a year-end rally.”
Bitcoin has only retreated about 13% in early September from its mid-August peak. The current decline from the all-time high is 9.5%, which is relatively minor compared to previous bull market year corrections.
Historically, BTC has declined in 8 of the last 13 Septembers but still shows approximately a 4% gain this month. Historically, it performs much better in ‘Uptober’.
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