This crash is the largest liquidation since 2021. I want to analyze the entire situation from a microstructural perspective.
Source: Foresight News
First, we need to identify where the selling pressure is the greatest. We found that — traders on Coinbase began to sell heavily nearly an hour before this massive crash occurred.
Source: Foresight News
Of course, the largest drop is triggered by a series of liquidations, but this sustained selling pressure plays an important role in pushing prices into the area where leverage is forcibly liquidated. So how do we determine that the market is overheated? It's simple — the funding rate and the growth of open interest. These two factors are currently driving the market, indicating that people are using excessive leverage.
After the crash, Ethereum generated strong buying interest. The relative strength in recent days is also obvious — is someone buying?
Source: Foresight News
I personally enjoy analyzing market impacts very much. If I could only focus on one feature in the market, it would definitely be market impact. Here, you will see some shocking things — the market impact of XRP on Coinbase is quite significant.
Source: Foresight News
In a relatively mature large market, we witnessed a series of large sell orders, which led to a market drop of more than 5%. We are still unclear about what exactly happened, but this is obviously unusual.
Source: Foresight News
You can see that these sell orders are abnormal. This situation may be worth paying attention to in the coming days. Perhaps a big player has been forced to sell off.
Source: Foresight News
When similar situations occur, it is usually a chain reaction of forced liquidation sell orders. Market makers absorb this selling pressure and hedge, causing signals to spread between major exchanges. For perpetual contract exchanges, this means that stop losses and liquidations are triggered, and the final impact becomes more significant, especially when this situation occurs within minutes.
Currencies like XRP can soar hundreds of percentage points even if their market capitalization is comparable to the largest companies in the United States. Relative to market capitalization, the liquidity of XRP in the market remains poor.
In a hot market, the next common phenomenon is a rapid reversal of prices from the lowest point. At this time, there will be a large number of liquidations, liquidity constraints, and many profit-taking players wanting to buy the dip.
Source: Foresight News
The volume chart shows cumulative trading volume during the crash. Surprisingly, both USDC and FDUSD had significant trading volumes, but the trading volume of $ADA was particularly large.
Source: Foresight News
[Disclaimer] The market has risks, and investments should be cautious. This article does not constitute investment advice. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Invest accordingly at your own risk.
This article is reprinted with permission from: (Foresight News)
Original author: Ltrd
'Review of the tragedy of 500,000 people being liquidated! Why was there a chain liquidation? Understand the current market situation with 8 charts.' This article was first published in 'Crypto City'
