Early this morning, Bitcoin's price briefly plunged to $94,000, triggering intense fluctuations in the cryptocurrency market, with altcoins suffering even more severely, most tokens dropping by 20%-30%. As of the time of writing, Bitcoin has recovered somewhat. This market turmoil resulted in a total network liquidation amount of $1.716 billion, involving 570,876 traders. This event has not only become the largest liquidation wave in nearly two years but also reflects the current structural risks and emotional volatility in the crypto market.
This article will deeply analyze the background, data, market impact, and future trends of this event.
Market clearing scale hits a one-year high: Leveraged trading becomes a risk hotspot.
This liquidation event set a record of $1.716 billion in liquidation amount, surpassing last month's single-day liquidation scale of approximately $500 million. Among them, long positions suffered particularly heavy losses, amounting to $1.53 billion, while short positions lost $155 million. Data shows that small altcoins have become the 'disaster area' of this liquidation, with liquidation amounts reaching $564 million, of which over 96% were long positions.
Liquidation disaster areas: The underlying logic behind platform data.
Binance leads the way in this clearing event, with a total clearing amount reaching $740 million, accounting for 42% of the total network clearing amount.
OKX and Bybit rank second and third, with liquidation amounts of $422 million and $369 million, respectively. The largest single liquidation transaction occurred in Binance's ETH/USDT contract, amounting to $19.69 million.
Bitcoin and Ethereum, as the two core assets of the crypto market, have not been spared.
Bitcoin briefly fell below the psychological barrier of $100,000, dropping over $6,000 in one day, recording $182 million in liquidations, with long positions accounting for 77% of the losses.
After failing to break through the key resistance level of $4,050, Ethereum's price tested the support at $3,500 again, recording $243 million in liquidations, with long positions losing $219 million.
Historical perspective: Why is the scale of this liquidation so enormous?
Large-scale liquidation events in the crypto market are not uncommon, but the scale of this liquidation wave is clearly exceptional.
From a trend perspective, since 2022, with the expansion of market size and increase in leverage, the total clearing amount has continuously increased. More importantly, the concentrated risk exposure of leveraged traders makes the market more vulnerable in the face of extreme volatility.
It is worth noting that the market has experienced multiple clearing peaks over the past year, but the scale mostly hovered between $500 million and $1 billion. However, this time the amount has exceeded the record high of liquidations in the crypto market since the 519 incident in 2021, possibly setting a record for this round of bull market, and far exceeding the 312 incident in 2020.
The reasons for this liquidation wave mainly include the chain reaction of high-leverage positions, the liquidation chain triggered by severe market fluctuations, and the dominant structure of long positions. Especially the sharp drop in Bitcoin triggered leveraged liquidations, coupled with the high volatility in the altcoin market, resulted in long liquidations accounting for over 90%. Compared to the external shocks during the 312 incident, this time it is more a result of internal leverage imbalance.
This serves as another warning to investors: in a highly volatile market, rational leverage control is key to long-term participation.
Ethereum: From on-chain activity to resilience in the derivatives market.
On-chain data and network activity.
DApp transaction volume rankings over the past 7 days.
As the second-largest asset in the market, Ethereum has shown certain resilience during this liquidation wave. On-chain data indicates that Ethereum's network transaction volume surged by 24% over the past week, reaching $24.2 billion, and together with second-layer solutions like Base, Arbitrum, and Polygon, the total transaction volume skyrocketed to $48.6 billion. This data far exceeds Solana's $29.5 billion, showing that Ethereum's network activity remains high.
Moreover, since November 29, ETH ETF inflows have reached a historical high of $1.17 billion, injecting liquidity into the market. Nevertheless, the ETH price has still not managed to break through the long-term resistance level of $4,050, and the pressure at this technical level has clearly restricted the price trend.
Derivatives market signals: Optimism has not completely dissipated.
From the futures and options market, the derivatives market for ETH still maintains strong resilience.
The annualized premium for Ethereum futures remains at 17%, significantly higher than the neutral level of 10%, indicating continued strong demand for ETH leverage.
Meanwhile, the skew of Ethereum options has decreased from -7% to -2%, indicating a shift in market sentiment from extremely optimistic to neutral, but no significant bearish signals have emerged.
Additionally, the perpetual contract financing rate is currently at 2.7%, above the neutral threshold of 2.1%, indicating that the market's demand for short-term leverage remains strong. However, the financing rate has gradually decreased from its peak of 5.4% on December 5, which may reflect an increased caution among some traders regarding market volatility.
Macro and micro: Dual factors influencing market sentiment.
The volatility of the crypto market is often accompanied by changes in macroeconomic variables. This plunge is no exception, as the macroeconomic environment has significantly impacted investor confidence.
Recently, China's November inflation data fell by 0.6% month-on-month, reflecting the risks of weak global economic growth. Meanwhile, Nvidia's stock price drop due to monopoly investigations has intensified downward pressure on the tech sector, indirectly affecting investors' preferences for risk assets.
Meanwhile, the inherent volatility and structural risks of the cryptocurrency market have exacerbated panic sentiment. The activity of on-chain data and ETF inflows, although providing some support to the market, have not fully offset the negative impact of the external environment.
Future outlook: Will altcoins find a breathing space?
Technical indicators and key support levels.
Bitcoin needs to firmly stand above the key psychological level of $100,000 to stabilize market sentiment; Ethereum needs to re-challenge the resistance level of $4,050 to restore investor confidence. In the altcoin sector, although the current liquidation ratio is high, there may be rebound opportunities after the market experiences a deep correction, especially for projects with strong fundamentals and community support.
Structural opportunities and risks.
The actions of institutional investors during this liquidation event are worth noting. ETF inflows and improvements in on-chain data may provide a foundation for future market recovery, but the high-leverage operations of retail traders remain a primary source of market vulnerability. In the short term, as market turbulence gradually calms down, professional investors may reallocate positions to lay the groundwork for the next market trend.
Conclusion: Market review and warnings after the liquidation storm.
This liquidation event once again highlights the high volatility and high-risk characteristics of the cryptocurrency market. The sharp drop in Bitcoin and Ethereum not only triggered short-term panic but also reminds investors to manage leverage positions cautiously and avoid falling into uncontrollable risks due to market fluctuations.
According to CoinGlass data, the probability of Bitcoin rising in December and January over the past 12 years has been half. This historical data indicates that the overall performance of the crypto market at year-end and beginning is relatively flat, with increased volatility but unclear trends. In the future, investors need to pay more attention to market data, macro environments, and the dynamic changes in leverage positions, ensuring risk management in their strategies to support long-term investment plans.