January 4, 2024

Crypto Markets Plunge: A Whopping $200 Billion Erased in Hours

Cryptocurrency enthusiasts find themselves in a sea of red today as the market cap of digital assets takes a staggering hit, wiping out an impressive $200 billion.

The collective market cap for cryptocurrencies currently hovers at $1.59 trillion, down from the recent peak of $1.70 trillion but slightly recovered from the initial dip to $1.50 trillion.

Bitcoin experienced a significant drop, plummeting nearly 10% to almost $41,000 within a span of just a few hours. This downturn follows BTC encountering resistance around $46,000 on December 2, marking its highest level since April 2022. Ether (ETH) also suffered a substantial 15% decline during this tumultuous flash crash.

Over half of the top 100 digital assets, ranked by market cap, witnessed double-digit losses throughout the day.

The root cause of this market turbulence can be traced back to an expulsion of excessive leverage from the digital asset markets. Open interest surged, coupled with historically high funding rates favoring long positions.

As of the latest update, bitcoin is trading at around $42,900, reflecting a 4.8% decrease in the past 24 hours.

This correction in the crypto market triggered approximately $687 million in liquidations within the futures market over the last day.

CoinGlass data reveals that more than 86% of the liquidated crypto positions within the past 24 hours belonged to long positions, resulting in the liquidation of over 205,000 traders.

Breaking down the total liquidations, BTC contributed over $164 million, with $137 million linked to long positions.

While this liquidation event may be viewed as a healthy pullback, resetting the overheated funding rates, the question remains whether the correction has concluded or if further adjustments are still needed.

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