On the morning of December 10, 2024, Bitcoin experienced a sudden spike drop, quickly falling to $94,000, causing severe turbulence in the entire cryptocurrency market, with altcoins suffering particularly heavy losses. Many token prices fell by over 20%-30%. As of the time of writing, Bitcoin has recovered somewhat, but the volatility of market sentiment remains evident. This market fluctuation has had a huge impact, with total liquidation amounts reaching $1.716 billion, involving 570,876 traders.
Market Liquidation Wave: Leveraged Trading and High-Risk Exposure
This market liquidation amount has set a record high since 2023, surpassing last month's liquidation scale of about $500 million. In the liquidation event, long positions suffered the most, with total losses reaching $1.53 billion, while short positions lost $155 million. The most affected were small altcoins, with liquidation amounts reaching $564 million, of which over 96% came from long positions.
Clearing Data from Major Trading Platforms
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 also not been spared in this volatility. Bitcoin once fell below the psychological barrier of $100,000, with a single-day drop of over $6,000, and the total liquidation amount reached $182 million, of which long positions accounted for 77%. Ethereum similarly faced a significant decline, failing to break through the key resistance level of $4,050, and the price retested the support level of $3,500, with a liquidation amount of $243 million and long position losses of $219 million.
Analysis of the Background of Market Turbulence
In recent years, with the expansion of the cryptocurrency market and the popularity of leveraged trading, the market's sensitivity to volatility has gradually increased. Over the past year, the market has experienced multiple waves of liquidations, and although most liquidation scales were between $500 million and $1 billion, this liquidation amount has exceeded the '519 event' of 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 a sudden plunge, leading to a rapid liquidation of numerous leveraged positions.
Sharp Shift in Market Sentiment: The violent fluctuations of Bitcoin in the short term triggered panic, especially concentrated long positions, resulting in massive liquidations.
Imbalance in Market Structure: The internal causes of this liquidation wave are more pronounced; compared to the external shocks in March 2020, this time it is more due to internal leverage imbalances.
These factors combined led to a moment of chaos in the market.
Ethereum: On-Chain Activity and Resilience of the Derivatives Market
Despite the severe market fluctuations, Ethereum has shown relatively strong on-chain activity. In the past week, Ethereum's network transaction volume surged by 24% to $24.2 billion, with the overall transaction volume (including Layer 2 solutions) skyrocketing to $48.6 billion, demonstrating the resilience of the Ethereum ecosystem.
Meanwhile, the inflow of funds into ETH's ETF reached a historical 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.
Signals from the Derivatives Market
The futures market for Ethereum maintains a strong premium, with an annualized premium of 17%, higher than the neutral level of 10%. The skew in the options market has decreased from -7% to -2%, indicating that market sentiment has shifted from extremely optimistic to neutral, but there are no obvious bearish signals. The perpetual contract financing rate has also gradually fallen 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 inflation data for November fell by 0.6% month-on-month, reflecting the weakness of global economic growth, while NVIDIA's stock price decline has also intensified downward pressure on the tech sector, indirectly affecting investors' preferences for risk assets.
Furthermore, the market's own volatility and the concentrated risk of leveraged trading have intensified investors' panic. Although Ethereum's on-chain activity and ETF fund inflows provide some support to the market, the external economic environment continues to exert pressure.
Future Outlook: Is There a Rebound Opportunity for Altcoins?
For Bitcoin and Ethereum, the recovery of market sentiment and breakthroughs of key technical levels will determine the short-term trend. Bitcoin needs to stabilize at the psychological barrier of $100,000, while Ethereum needs to challenge the resistance level of $4,050 again to restore market confidence.
For altcoins, although this wave of liquidations has led to significant declines, some projects with strong fundamentals and community support may find rebound opportunities after a deep market correction. As the market gradually calms down, institutional investors may reposition themselves, potentially bringing rebound opportunities in the short term.
Summary: Warnings of High Volatility and Risk Management
This liquidation event of $1.716 billion has once again exposed the high volatility and high-risk characteristics of the cryptocurrency market. The sharp fluctuations in the prices of Bitcoin and Ethereum remind 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 the dynamics of leveraged positions, reasonably adjusting investment strategies to keep risks controllable and prepare for long-term investments.