Crypto markets experienced a significant downturn in the past 24 hours, resulting in a massive liquidation of leveraged positions, with altcoins taking the brunt of the losses. High funding rates, low liquidity, and news of repayments to the 2014 Mt.Gox hack victims triggered this unexpected event.
In the futures market, traders betting on higher prices saw over $190 million in liquidations, with Bitcoin and various altcoins affected.
Altcoins outshine Bitcoin in liquidation figures
In an unexpected twist, altcoins surpassed Bitcoin regarding liquidation figures during the recent crypto market turbulence. Of the total $190 million in liquidations, approximately $45 million stemmed from altcoin futures, while Bitcoin accounted for a relatively lesser $36 million in losses. This unusual move highlights the volatility and uncertainty surrounding the altcoin market.
Among the altcoins, Solana’s SOL tokens bore a significant brunt of the losses, with traders incurring nearly $20 million in liquidations. Additionally, Bitcoin protocol Ordinals (ORDI) traders faced losses of $8 million. These substantial losses demonstrate the risks of trading leveraged positions in the highly volatile altcoin market.
Crypto exchange Binance emerged as the leader in liquidation figures, with over $97 million in liquidations reported, making it the most affected among counterparties. The market-wide decline in the past 24 hours affected traders across various exchanges, underscoring the need for caution and risk management in cryptocurrency trading.
Largest liquidation figures in recent weeks
The recent liquidation figures are among the highest observed in recent weeks, following a nearly $500 million flush-out in early December. These frequent and substantial liquidations serve as a reminder of the inherent risks associated with leveraged trading in cryptocurrency markets.
Liquidations occur when a cryptocurrency exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. This happens when a trader cannot meet the margin requirements for a leveraged position, indicating that they do not have sufficient funds to maintain the trade open. Such events are not uncommon in highly volatile markets like cryptocurrencies.
Mt. Gox repayments trigger the market-wide decline
The sudden decline in cryptocurrency markets was partially triggered by news of repayments to victims of the infamous Mt.Gox hack in 2014. In the hack, Mt.Gox, a now-defunct cryptocurrency exchange, lost 850,000 Bitcoin (BTC), valued at approximately $36 billion today. On Tuesday, reports began circulating that Mt.Gox was starting to repay its victims.
Some participants in the mtgoxinsolvency subreddit group claimed to have received payouts in yen over PayPal. However, others who had chosen to receive their repayments in cash directly into their bank accounts reported not having seen any inflows yet. The mixed reports regarding Mt.Gox repayments have added an element of uncertainty to the crypto market, contributing to the decline.
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