As a seasoned financial analyst with extensive experience in the crypto market, I’ve witnessed numerous market fluctuations and learned to read between the lines of complex market data. The recent crypto market correction, which saw $140 billion in losses and over $350 million in liquidations, is no exception.
In simple terms, the value of cryptocurrencies plummeted by $140 billion in a single day, bringing the total market capitalization down from $2.43 trillion to $2.30 trillion. The primary cryptocurrencies, Bitcoin and Ethereum, experienced significant selloffs as investors perceived the upcoming Ethereum ETF launch as an opportunity to sell. Consequently, Ethereum’s price dropped by over 9% in just 24 hours, setting off a chain reaction of corrections across the market.
In addition, crypto market sell-offs due to margin calls are expected to persist, with traders preparing for significant events such as options expiries, the release of US PCE inflation data, and the upcoming Federal Reserve interest rate announcement.
Crypto Market Liquidations on Ethereum Sell the News Event
The introduction of an Ethereum ETF drew a subdued reaction from both the spot market and derivatives investors. This occurrence bore resemblance to the market response following the launch of a Bitcoin ETF earlier in the year, which also resulted in sell-offs by investors.
On its launch, the Ether ETF managed by Spot saw a substantial inflow of $106.6 million. This was primarily due to the large number of investors pouring into the BlackRock Ethereum ETF. However, just one day later, the net inflow decreased significantly to $133.3 million, triggering a selloff in Ethereum.
In the past day, approximately $350 million worth of cryptocurrencies was liquidated as a result of the significant price drops in Bitcoin (down 4%) and Ethereum (down 9%). According to Coinglass data, over 81,000 traders have experienced liquidations. The largest single liquidation order, valued at $11.78 million in Bitcoin-USD trading pairs, took place on Binance.
As a crypto investor, I’ve observed that around $315 million worth of long positions and a mere $35 million short positions were forcedfully closed in the previous 24 hours. Among these liquidations, Ethereum took the lead over Bitcoin. This market downturn was undeniably painful, but it also presented an alluring buy-the-dip opportunity for those with a keen eye and a strong stomach.
Several factors contributed to the change in attitude towards Ethereum (ETH). Among these were options traders aiming for lower prices during monthly expirations, massive sell-offs by large investors, Mt. Gox repayments, and a weak earnings season for US tech companies. Notably, crypto research firms such as QCP Capital and 10x Research expressed bearish views on Ethereum, citing ongoing market weakness as their primary concern.
Why Liquidations Will Continue
As a market analyst, I’m observing that we have an upcoming monthly options expiry coming up this Friday. The prices of Bitcoin and Ethereum are currently experiencing downward pressure as traders prepare for over $5.5 billion worth of crypto options set to expire on Deribit, the largest derivatives exchange.
Approximately 61,194 Bitcoin options with a total value of around $4 billion will expire on the Deribit platform. The put-call ratio stands notably high at 0.60, while the maximum potential loss (max pain point) is located at the price level of $63,000.
Approximately 143,391 Ethereum options are set to expire, carrying a total value of approximately $1.6 billion. The put-call ratio stands at 0.46. The price that would cause the maximum option payout for Ethereum is currently set at $3,400 – higher than the current Ethereum price of $3,166.
Additionally, the impending release of the Personal Consumption Expenditures (PCE) inflation data on Friday and the forthcoming Federal Open Market Committee (FOMC) meeting at which the Fed will announce its interest rate decision are significant influences pushing the cryptocurrency market downward. Cautiousness has set in among traders as they prepare for these pivotal events.
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2024-07-25 18:18