Crypto Bloodbath: $489M Longs Wiped Out

Bitcoin experienced a decline after reaching all-time highs earlier this week, leading to significant liquidations. This event erased almost $500 million from leveraged positions, revealing the inherent volatility within the cryptocurrency’s recent surge.

As of this writing, the price of Bitcoin has decreased by 1.2% over the last day, falling approximately 3% from its peak of $126,080 reached on Monday, according to data compiled by CoinGecko. Ethereum’s performance was weaker, showing a 4.6% decrease for the day, bringing its price to $4,492.

This market adjustment triggered the closure of over $635 million in leveraged crypto positions across various exchanges within the past 24 hours. Out of this amount, $489 million represented long positions. Ethereum traders felt the impact most acutely, with $142 million in Ethereum long positions being liquidated, exceeding the $114 million in liquidated Bitcoin long positions, according to CoinGlass data.

Ryan Lee, the chief analyst at the Bitget exchange, explained to Decrypt that the current downturn is attributable to multiple converging factors. These include investors securing profits after an approximate 10% increase in value over the preceding two weeks.

Lee further commented that “Gold’s recovery this week appears to have added short-term pressure to Bitcoin.” He explained that some investment capital focused on macroeconomic trends may be shifting towards precious metals. He also pointed to the dollar gaining strength, and “unclear macro signals” creating an environment where investors reduce risk exposure.

The U.S. dollar index (DXY), which tracks the dollar’s performance against a basket of other currencies, reached a peak of 98.989 during the day on Wednesday. This is a notable increase from its recent low of 96.218 on September 17, as indicated by TradingView data.

A Necessary Adjustment?

Lee believes the ongoing decline is a healthy market correction rather than a reversal of the overall trend. He anticipates a further decline of 3% to 4% before prices stabilize and potentially break above the $126,000 mark. Should positive momentum persist beyond the current record high, Bitcoin could potentially climb to between $132,000 and $135,000. However, this projection depends on improved market sentiment and continuous inflows into ETFs.

Data from Myriad, a prediction market created by DASTAN (Decrypt’s parent company), reflects continued optimism among users in recent days. Predictors estimate a 57% chance that Bitcoin will rise to $140,000, compared to a drop to $110,000.

Despite this short-term volatility, the long-term forces supporting Bitcoin remain intact, as reported previously by Decrypt.

Analysts highlight the continued search for assets shielded from government influence and the “debasement trade,” which is driven by growing government debt, as key factors fueling the optimistic narrative for Bitcoin.

Similarly optimistic, Austin King, the Co-Founder of Nomina, a unified decentralized finance trading platform, told Decrypt that he anticipates a “compelling fourth quarter for crypto,” as investors see Bitcoin as a protection against increasing global political uncertainties.