The data shows that the derivatives market of cryptocurrencies has lost the highest number of liquidations in the past day after the crash seen by altcoins.
Altcoin Longs Witness Squeeze, Ethereum Leads Decline
The past day has been a hectic time in the cryptocurrency market, with most altcoins suffering a decline of more than 5%. As is often the case, this industry-wide volatility has caused chaos on the derivatives side.
According to data from CoinGlass, the derivatives market has seen contracts worth about $429 million in liquidation in the past 24 hours.
The data for the liquidation flush that has occurred over the past day | Source: CoinGlass
A contract is said to “expire” when the platform it was opened on must close it by force after accumulating losses of a certain level (the exact amount may vary between exchanges).
As seen in the table above, holders of long contracts saw such a strong close during the previous day. Specifically, about $367 million of closings, equivalent to more than 85% of the total, involved these traders betting on a bullish outcome in the market.
The reason for such volatility naturally lies in the fact that cryptocurrencies as a whole have seen a downward spiral over time.
Below is a heat map showing how each asset contributed to this latest derivative.
The distribution of the liquidations by symbol | Source: CoinGlass
Unlike what is often the case during these violent liquidation events, Bitcoin (BTC) is not leading the charts in this metric. Instead, Ethereum (ETH), the second-largest cryptocurrency based on market cap, is on top with a close of $92 million.
This may be down to the fact that Bitcoin has more or less moved sideways during this period, while Ethereum has seen a decline of more than 3%. It is interesting that behind these two top coins are the memecoins Dogecoin (DOGE) and Shiba Inu (SHIB), with a capital of $ 60 million and $ 23 million, respectively.
These altcoins saw the biggest drop among top cryptocurrencies at around 11% each. This, combined with the fact that memecoins receive speculative activity in general, can explain why DOGE and SHIB are ahead of coins that can be called ETH or BTC.
Even then, the difference between Dogecoin and Bitcoin is currently $10 million, which is impressive considering the market differences between the two assets.
A mass extinction event like the latter is known as a “crowding.” During these events, foreclosures can flow together like a waterfall, causing even higher volatility in the market. Since a long time takes most of the recent completion, the event will be called “long pressure.”
A squeeze is not an uncommon event in the cryptocurrency market, due to the generally high volatility of various coins, but an altcoin-dominated squeeze of a scale like this is certainly not a frequent occurrence.
Trading currency of ETH
Following this latest drop, Ethereum, the largest among altcoins, has dropped to the $3,400 level.
Looks like the price of the coin has gone down recently | Source: ETHUSD on TradingView
Featured image from Shutterstock.com, CoinGlass.com, chart from TradingView.com
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