On December 10, 2024, Bitcoin experienced a sharp drop, quickly falling to $94,000, leading to severe turbulence in the entire cryptocurrency market, with altcoins suffering particularly heavy losses. Various token prices once dropped by over 20%-30%. As of the time of publication, Bitcoin has recovered somewhat, but fluctuations in market sentiment remain evident. This price movement has had a significant market impact, with a liquidation amount of up to $1.716 billion, involving 570,876 traders.
Market Liquidation Wave: Leveraged Trading and High-Risk Exposure
This liquidation amount has set a new record for 2023, surpassing the previous month's liquidation scale of about $500 million. In the liquidation event, long positions suffered the most severe losses, totaling $1.53 billion, while short positions lost $155 million. The most affected were still small altcoins, with liquidation amounts reaching $564 million, of which over 96% came from long positions.
Major Trading Platform Liquidation Data
Binance: Highest liquidation amount, reaching $740 million, accounting for 42% of the total liquidation amount across the network.
OKX and Bybit ranked second and third, liquidating $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 have not been spared in this volatility. Bitcoin briefly fell below the psychological threshold of $100,000, with a single-day drop of over $6,000, and liquidation amounts reaching $182 million, with 77% of long positions suffering losses. Ethereum also faced a significant decline, failing to break through the key resistance level of $4,050, and the price tested the support at $3,500 again, with liquidation amounts totaling $243 million and long position losses at $219 million.
Market Turbulence Background Analysis
In recent years, as the cryptocurrency market has expanded and leveraged trading has become more prevalent, the market's sensitivity to volatility has gradually increased. Over the past year, the market has experienced multiple liquidation waves; although most liquidation scales ranged between $500 million to $1 billion, this liquidation amount has already surpassed the '519 incident' in 2021, setting a new record.
The main reasons for this large-scale liquidation wave include:
Chain Reaction of Leveraged Trading: With the high volatility of the cryptocurrency market, leveraged trading has increased the market's fragility, especially when Bitcoin experiences sharp drops, leading to the rapid liquidation of numerous leveraged positions.
Abrupt Shift in Market Sentiment: The drastic fluctuations of Bitcoin in the short term triggered panic, particularly concentrated long positions, leading to massive liquidations.
Market Structure Imbalance: The internal causes of this liquidation wave are more pronounced; compared to the external shocks of March 2020, this time it is largely due to internal leverage imbalances.
These factors have collectively led to a state of chaos in the market.
Ethereum: On-Chain Activity and Derivatives Market Resilience
Despite the severe market fluctuations, Ethereum has performed relatively well in terms of on-chain activity. In the past week, Ethereum network transaction volume surged by 24%, reaching $24.2 billion, while overall transaction volume (including Layer 2 solutions) skyrocketed to $48.6 billion, demonstrating the resilience of the Ethereum ecosystem.
At the same time, Ethereum's ETF inflow reached an all-time high of $1.17 billion on November 29. Nevertheless, Ethereum's price still failed to break through the technical resistance level of $4,050, which has constrained its price movement.
Derivatives Market Signals
The Ethereum futures market maintains a strong premium, with an annualized premium of 17%, higher than the neutral level of 10%. The skew in the options market has dropped from -7% to -2%, indicating a shift in market sentiment from extreme optimism to neutral, but no significant bearish signals have emerged. The perpetual contract financing rate has also gradually retreated from a peak of 5.4% on December 5 to 2.7%, reflecting an increased vigilance towards short-term volatility.
Dual Impact of Macroeconomic Environment and Market Sentiment
The impact of macroeconomic factors on the cryptocurrency market cannot be ignored. Recently, China's November inflation data fell by 0.6% month-on-month, reflecting weakness in global economic growth, while the decline in Nvidia's stock price has also intensified downward pressure on the tech sector, indirectly affecting investors' preferences for risk assets.
Moreover, the market's own volatility and the concentrated risks of leveraged trading have exacerbated investors' panic. Although Ethereum's on-chain activity and ETF inflows provide some support for the market, the external economic environment continues to exert pressure.
Outlook: Is There a Rebound Opportunity for Altcoins?
For Bitcoin and Ethereum, the recovery of market sentiment and the breakthrough of key technical levels will determine short-term trends. Bitcoin needs to stabilize at the psychological level of $100,000, while Ethereum needs to challenge the resistance level of $4,050 again to restore market confidence.
For altcoins, although this liquidation wave has led to significant declines, some projects with strong fundamentals and community support may see rebound opportunities after the market's deep correction. As the market gradually calms, institutional investors may reallocate, potentially bringing rebound opportunities in the short term.
Summary: High Volatility and Risk Management Warnings
The recent liquidation event of $1.716 billion has once again exposed the high volatility and high-risk characteristics of the cryptocurrency market. The drastic fluctuations in the prices of Bitcoin and Ethereum serve as a reminder for investors to manage risks cautiously in high-leverage operations to avoid uncontrollable losses due to sudden market fluctuations.
For future market trends, investors should closely monitor macroeconomic variables, changes in market sentiment, and dynamics of leveraged positions, reasonably adjust investment strategies, ensure controllable risks, and prepare for long-term investments.