The price of Bitcoin dropped 20% Monday morning to below $47,600, resulting in a whopping $3.91 billion worth of long and short positions across the major exchanges being liquidated over the past 24 hours.
After the correction, the cryptocurrency market’s total capitalization saw about $163 billion wiped off in the matter of hours. Bitcoin in particular lost roughly $5,000 of its value but has since rallied back to $53,000. The leading cryptocurrency traded as high as $58,000 over the weekend.
When Bitcoin’s price goes below the liquidation price of their positions, exchanges liquidate or close their positions because traders cannot fulfill margin requirements of their leveraged positions.
“In the past weeks, a lot of accumulation on the long side happened, so traders should expect such correction events,” Bitfinex CTO Paolo Ardoino said, adding that such corrections are “normal.”
Most of the liquidations occurred on Binance, Huobi and Bybit. CryptoQuant, a popular cryptocurrency monitoring company, also revealed that “there were significant BTC inflows into all exchanges”, mostly Gemini.
In addition to Bitcoin, the price of altcoins have plunged 40%. Ethereum made its way down to $1,750 after going above $2,000 on Saturday. BNB suffered the biggest drop at 13%, while Polkadot is also down about 8% at press time.
The price declines have coincided with the USD falling as well. The U.S. dollar has dropped to multi-year lows against its Australian peer, the New Zealand dollar and the British pound.
Dollar net short position also fell to $29.09 billion recently, its lowest level since mid-December. It has been for four straight weeks that the USD net shorts have been falling.
Volatility is expected to continue throughout the week as more than 63,000 Bitcoin options are set to expire this Friday. Total open interest in the Bitcoin options market meanwhile has surpassed $3 billion.
The cryptocurrency market has made attempts at recovery several times as people jumped on to buy the dips. However, the market has continued its downtrend so far. Bitcoin is still up 87% since the start of the year and about 14x up from its March 2020 low.
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