Thursday, April 18, 2024

Cryptocurrency Market Correction Triggers Significant Liquidations.

The price corrections of Bitcoin (BTC) and Ethereum (ETH) on Tuesday caused an 8% decline in the total market capitalization of the cryptocurrency space, leading to the liquidation of $538 million in long positions. The use of Decentralised Finance (DeFi) platforms may decline if market prices continue to fall, particularly for lending and borrowing protocols.

The crypto market is experiencing a decrease in buying pressure
According to Coingecko data, the overall cryptocurrency market was down 8% on Tuesday after a protracted bull run. The top 20 markets seeing the biggest price corrections are Bitcoin and Ethereum.

The bearish trend even hit cryptocurrencies like Solana (SOL), whose rising fame and meme coins have drawn traders’ interest. As of writing, SOL is down 12%, along with meme currencies like dogwifhat (WIF) and Book of Meme (BOME), which are down 15.4% and 20.6%, respectively.

Trader caution may have contributed to the market collapse due to the Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) meeting. In the event that the Fed decides to maintain interest rates at their current levels for an extended period of time, riskier assets like cryptocurrencies may suffer.

The crypto market meltdown wipes out long-term traders

But on the last day, plunging market prices erased $538 million worth of long positions, catching a few traders who had been long off guard. Coinglass data shows that 240,000 dealers liquidated long and short orders totaling $652.8 million.

On the 24-hour liquidation heatmap, Bitcoin (BTC), Ether (ETH), and Solana (SOL) have the largest values at nearly $192.15 million, $127.46 million, and $36.7 million, respectively. The greatest CEX liquidation happened in a $12.25 million OKX-BTC-USDT-SWAP.

GMXV2, GMX, and Kwenta are three notable on-chain derivative exchanges that also saw liquidations totaling more than $56 million. According to Tradao data, a position on GMX experienced the largest liquidation, valued at approximately $9.3 million.

The liquidation of ether collateral could impede DeFi’s expansion

Collateral in DeFi is an important area of market liquidation to examine. Collateral liquidations happen when a smart contract sells off a borrower’s collateral to settle a debt. This typically occurs when markets are erratic and there is a significant decline in the value of the collateral.

According to Parsec data, DeFi liquidated more than $5.4 million worth of collateral in the last 24 hours, with Ether accounting for $4.27 million. If Ether drops below $3,008, the data indicates that the liquidations will climb to $24 million in collateral. This could impede DeFi’s growth, which has recently increased due to the bull run.

An important consideration that could affect everything is the Securities and Exchange Commission’s (SEC) eighth-spot ETF ruling. Should the SEC approve, DeFi might experience rapid expansion. Additionally, Fidelity has updated its ETF application to allow for staking, which could lead to the onboarding of retail investors into DeFi.

Cryptured Team
Cryptured Team
The writers team at Cryptured.com is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.
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