Today the overall market capitalization of cryptocurrencies has dropped by more than 5% compared to yesterday’s prices and there have been significant liquidations.
The drop in cryptocurrency prices and today’s liquidations
Starting from Bitcoin, today its price has fallen below $60,000 again.
Yesterday the day started with a return below $63,000, and during the day it then fell below $62,000.
After the closing of the USA stock exchanges, however, there was a real small crash.
In fact, within just 1 hour the price dropped from $61,800 to $58,000, only to bounce back immediately to $59,000.
The sudden drop was 6%, then the small subsequent rebound reduced it to -5%.
It should be remembered that movements like these in the crypto markets are usual, so nothing unusual has happened.
Moreover, an increase in volatility was expected for this week, after two weeks of stagnation followed by an 8% increase.
Furthermore, the current price level is not only in line with that of last Wednesday, when the +8% rise began that had brought it back above $64,000 on Saturday, but it is also above the fateful threshold of $57,000 which constituted the bottom of the long phase of lateralization, still ongoing, which began at the end of February, with rare and brief exceptions.
Ethereum
The speech, however, is a bit different regarding the price of Ethereum and some altcoins.
In fact, last night the price of ETH dropped from $2,580 to $2,400, only to bounce back around $2,470.
This is a significantly lower level compared to the bottom of the lateralization phase of recent months, placed above $2,800.
The problem with Ethereum, during this period, started at the beginning of August, when for example even Bitcoin fell significantly below the bottom of the lateralization period. However, the price of Bitcoin returned above within three days, while Ethereum has not yet returned stably above $2,800 since then.
Probably the sales of ETH from the new Grayscale ETF on Ethereum (ETHE) are weighing, which have been generating continuous overall outflows from the ETFs on ETH for several days now. It should be remembered that ETHE has existed for many years, and that in July it was simply transformed into an ETF.
The trend of many altcoins follows that of Ethereum, more than that of Bitcoin, and in fact, Bitcoin’s dominance has gone from 54% at the beginning of July to the current 57%. In particular, since Saturday it has gone from 57% to 57.3%.
The liquidations
Since many leveraged long positions had been opened, last night’s drop triggered a series of significant liquidations that, in turn, further pushed the price down.
When a leveraged long position risks going into loss, it is automatically liquidated instantly, with the sale of the underlying asset. Such sales generally in turn cause a further drop in price, causing a cascading effect on other leveraged long positions.
Last night, in just one hour, over 110 million dollars worth of long positions were automatically liquidated in the cryptocurrency market.
JUST IN: $110,000,000 liquidated from the cryptocurrency market in the past 60 minutes.
— Watcher.Guru (@WatcherGuru) August 27, 2024
This caused the drop in the price of Bitcoin not to stop at $60,000, but to continue below $59,000, stopping only at $58,000. At that point, once the forced liquidations were halted, it was able to make a small rebound and climb back above $59,000.
The causes
The cause of the drop to $58,000 is certainly the forced liquidations of long positions. But these, in turn, were triggered by a previous decline, caused by different reasons.
Note that today the Dollar Index, which measures the strength of the US dollar, has risen from 100.5 to 100.8 points, although it did so hours after the mini-crash of the crypto market.
However, this mini.collapse occurred when the US stock markets had closed, and before the Asian ones reopened.
However, it is possible that it was influenced by the after-hours of the USA stock exchanges, and that this in turn influenced today’s dollar market. For example, even the Chinese stock exchanges are in sharp decline today. Therefore, it is very likely that the mini-crash of the crypto market last night has external origins.
Moreover, to tell the truth, even the very definition of mini-crollo does not seem adequate to describe what, in the crypto markets, appears as an absolutely usual phenomenon.
The sentiment remains very negative, with the fear and enthusiasm index that has dropped into decidedly negative territory (30 out of 100). Such a negative sentiment, with a Bitcoin price at $59,000, reveals that it is probably the altcoins in significant distress that are creating fear in the crypto markets.
The future
That there would be an increase in volatility during this week was widely expected by analysts.
It was not yet clear which direction it could have taken. So much so that at this moment, after yesterday’s decline, the chances of a rebound might have even increased.
In this historical period, which has been ongoing since the end of February, the price of Bitcoin has been doing nothing but moving sideways within a rather wide range. Meanwhile, the altcoins are instead experiencing greater suffering.
Perhaps only in autumn the situation will unlock. Therefore, an increase in volatility could really only mean that instead of staying still, the price starts to move, but maybe always remaining within a range of lateralization.
