Crypto Market dives following Bitcoin “flash crash” with $520M in liquidation
Bitcoin has experienced its most significant daily drop in nearly four months, plummeting below $41,000 and wiping out substantial leveraged positions over roughly the past 24 hours.
The broader crypto market also took a hit due to a broader selloff on Monday. The current market downturn follows Monday morning’s liquidation of $330 million in crypto futures contracts.
The event brought the total liquidations to $520 million, according to CoinGlass data. It marks the highest daily liquidation volume in at least three months.
While the catalyst for this plunge remains unclear, analysts suspect it could be linked to a deleveraging event rather than any fundamental news.
In a sudden drop Sunday evening, Bitcoin plunged from around $43,800 to nearly $40,500 in just minutes. This “flash crash” then saw prices quickly rebound to $42,400, only to resume their decline during U.S. afternoon hours, reaching as low as $40,200. This was a level previously breached during its climb a week ago.
As of writing, Bitcoin has recovered to above $41,000 despite still being down by seven percent in the past 24 hours. This decline marks the largest daily loss since August 17. However, Bitcoin remained five percent higher than its price at the beginning of December, when it was trading at $38,688.
Bitcoin’s recent surge from $27,000 to nearly $45,000 since October 1 has been unique compared to previous bull cycles, lacking the sharp drawdowns that are typically observed. This sustained upward momentum has been attributed to investor anticipation surrounding the potential approval of the first U.S. ETFs directly investing in Bitcoin.
In addition, the prospect of potential Federal Reserve interest rate cuts in 2024 has boosted the rally in Bitcoin and the broader cryptocurrency market.
Despite a remarkable year-to-date surge exceeding 150 percent and its role in propelling the broader digital asset market out of its 2022 slump, Bitcoin remains significantly below its pandemic-era peak of nearly $69,000 set two years ago.
“BTC just nearly doubled in 2 months with no pullbacks, a correction is not that surprising,” Bitcoin-focused market analyst Will Clemente said. “Corrections shake out ‘weak hands’ and leverage, allowing for a stronger foundation for eventual moves higher.”
Crypto market overview
Mirroring Bitcoin’s dive, Ether (ETH), the second-largest cryptocurrency, also experienced a significant drop of over seven percent within the same timeframe, falling below $2,200. Despite this decline, ETH remains seven percent higher than its price at the beginning of the month, as reported by CoinGecko.
Most of the rest of the cryptocurrencies also experienced significant declines. Notably, native tokens of Chainlink (LINK) and Cardano (ADA) shed eight to 12 percent of their value within the same timeframe.
The broader market downturn also impacted alternative cryptocurrencies. ORDI (ORDI), which experienced explosive growth and reached an all-time high of $68.37 only last week, has suffered a 14 percent decline within the past day. This popular BRC-20 token built on Bitcoin’s Ordinals protocol currently trades at $47.21.
The meme coin PEPE is cooling down after last week’s 26 percent surge. As of writing, it trades at $0.00000143 after touching a 24-hour low of $0.00000135.
Amid the widespread market decline, a few altcoins bucked the trend. Avalanche (AVAX), Injective (INJ) and Optimism (OP) registered price increases within the same timeframe.
A new report from CoinShares, a digital asset manager, suggests a keen interest in Solana (SOL) and Avalanche (AVAX) among institutional investors. Exchange-traded products tracking these tokens witnessed $5 million in inflows last week, highlighting their growing institutional appeal.
In addition, Immutable (IMX), a gaming token, defied the broader market downtrend by registering a 10 percent gain on Monday.
Following the sharp market downturn, the global crypto market capitalization has shrunk to $1.6 trillion, representing a 6.0 percent decline since yesterday. The decline extends to the CoinDesk Market Index (CMI), which tracks a basket of nearly 200 digital assets by market capitalization and currently shows a drop exceeding 7.0 percent.
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Kamal Masri
Kamal is an experienced financial analyst with a demonstrated history of working in the Financial Market. Skilled in Equities, Capital Markets, Portfolio Management, Risk management, and Corporate Finance. Kamal has worked at some of the leading online finance publications providing his expert knowledge on cryptocurrency. Kamal has written widely on digital assets across the stock and crypto media space and beyond, including for Coindesk, Ethereum World News and The FinTech Times.
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