Traders heavily invested in crypto faced liquidations totaling nearly $2 billion on Monday, marking one of the year’s largest market sell-offs. Analysts suggest these events are driven more by technical factors than deteriorating market conditions.
In the last 24 hours, over 370,000 traders were liquidated, amounting to $1.8 billion, according to CoinGlass data.
Most of these liquidations involved long positions in Ether and Bitcoin, while altcoins suffered significant losses as well.
The crypto market capitalization plummeted by over $150 billion, reaching a two-week low of $3.95 trillion, with Bitcoin (BTC) falling below $112,000 on Coinbase and Ether (ETH) dropping below $4,150—its largest decline since mid-August.
While the immediate fallout seems to have stabilized, with major cryptocurrencies finding short-term support, the historical trends of September may indicate further downturns ahead.
Overleveraged crypto traders: A familiar narrative
Real Vision founder Raoul Pal noted that this pattern recurs, stating, “the crypto market often anticipates a significant breakout, leading to excessive long positions. When it fails initially, liquidations occur, only for the actual breakout to follow, sidelining many traders.”
Related: Major long liquidation of the year: 5 key insights on Bitcoin this week
CoinGlass confirmed it as the largest long liquidation event this year, with past similar occurrences noted in late February, early April, and early August when the spot markets faced rapid declines.
Critique on altcoin leverage
Analyst “Bull Theory” attributed the recent decline to an “excessive imbalance” of leverage in altcoins versus Bitcoin. Liquidations for Ether surpassed $500 million, more than twice the liquidations for Bitcoin.
“When the leverage in altcoins reaches such extremes, the market reacts. A sharp downturn can trigger cascading liquidations that flush out weaker positions and reset the market.”
Nassar Achkar, chief strategy officer at CoinW, indicated that the recent sell-off might represent a temporary adjustment rather than a shift away from the longer-term bullish trend for Bitcoin.
Possible retreat to support levels
Additionally, IG market analyst Tony Sycamore mentioned to Cointelegraph that Bitcoin’s recent movements haven’t been correlated with tech stocks or gold, likely due to technical factors. He suggests more time may be needed for Bitcoin to adjust from its significant gains, especially following its August peak of $125,000.
“A dip back to the $105/100k support range, which includes the 200-day moving average at $103,700, seems plausible. This could flush out weaker positions and present a strong buying opportunity heading into year-end.”
Bitcoin has corrected approximately 13% since its mid-August peak. Presently, the drop from the all-time high is at 9.5%, a relatively mild pullback compared to previous bull market corrections.
Historically, BTC has declined in eight of the last thirteen Sepembers, yet it remains about 4% higher this month. Traditionally, Bitcoin has performed significantly better in ‘Uptober’.
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