The cryptocurrency market has seen a sharp correction in recent days, with more than $1 billion worth of liquidations in just one day, according to data released Thursday. With the impact on altcoins in particular escalating, questions are being raised about what factors led to the sharp decline.
Major Market Correction: Numbers Speak...$1 Billion
The correction began last Wednesday when Bitcoin (BTC) dropped from its all-time high of over $108,000 to $96,800. While these drops may seem relatively large, they are not uncommon in a market that is accustomed to extreme volatility.
Trading platform data indicates a massive liquidation, worth more than $1.01 billion on Friday alone. Notably, $844.36 million came from long positions, compared to $166.59 million from short positions, suggesting that the correction has hit bullish investors hard.
Altcoins bear the brunt
While Bitcoin led the decline, altcoins saw their share of losses. According to CoinGecko data, the total cryptocurrency market capitalization fell by 6.4% in the past 24 hours, reaching $3.5 trillion.
Ethereum (ETH): Down 7.7% since Thursday, falling from $4,100 to under $3,400 in just four days.
Solana (SOL): Down 7.4%.
Cardano (ADA): Down 9%.
Dogecoin (DOGE): saw the biggest drop of 11.8%.
Possible reasons behind the correction and liquidation of a billion dollars
This correction can be viewed from multiple angles. Initially, Bitcoin’s first break above $100,000 sent the market into a temporary profit-taking wave. Historically, Bitcoin has seen short-term corrections after hitting new highs.
On the other hand, the US Federal Reserve Chairman indicated the possibility of continuing to raise interest rates, which led to a decline in investors’ appetite for riskier assets. Meanwhile, in El Salvador, questions were raised about the government’s commitment to crypto-friendly policies due to the International Monetary Fund’s request to amend the legislation.
Bitcoin exchange-traded funds (ETFs) also saw a historic day of withdrawals, with total outflows totaling around $672 million. This withdrawal reflects institutional caution towards cryptocurrencies amid global economic uncertainty.
Bitcoin Shows Relative Resilience, But Could There Be a Bigger Correction?
Despite the declines, Bitcoin has continued to show relative resilience compared to altcoins. Its market dominance has risen to 52.25%, indicating continued investor appetite for Bitcoin as a major digital asset.
Market analysis suggests that the panic seen in recent days may also be linked to a traditional correction pattern in the cryptocurrency market. However, the possibility of a larger correction wave cannot be ruled out if the global economic environment continues to weigh on investor appetite.
This latest correction reflects the volatile nature of the cryptocurrency market, especially as global economic and regulatory pressures increase. With market losses exceeding $1 billion, the biggest challenge remains to restore confidence in the market while constantly monitoring the economic environment and regulatory developments.
If Bitcoin and major cryptocurrencies continue to show resilience to these challenges, these corrections could be an opportunity to reevaluate investment positions and prepare for the next upswing.