Over the past day, the cryptocurrency markets saw a significant sell-off, which led to widespread liquidations of leveraged positions.
With 85.3% of the positions being long, almost $737 million in positions were wiped out, underscoring the excessively optimistic positioning.
There was a decline in altcoins, including Ethereum (ETH), Ripple (XRP), and Solana (SOL), whereas meme coins had more significant losses.
Now, traders are watching key support levels to determine if this is a short-term shakeout or the start of a longer-term decline.
Massive Market Shakeout: $700M Liquidated Across 240K Traders
Midway through this week, the cryptocurrency market experienced a severe decline, with Ethereum, Ripple, and other altcoins plummeting on Wednesday.
The CoinGlass Liquidation Map data indicates that 243,970 traders were liquidated in the previous day, yielding a total liquidation value of more than $700 million. A noteworthy indicator of excessively bullish posture was the fact that 85.3% of the positions were long. On Binance, a $2.96 million BTCUSD stake was liquidated, making it the largest single liquidation.
According to the analysis, profit-taking by individual traders or major wallet investors, as well as capital rotation or positioning prior to the anticipated upcoming altcoin season, are likely the causes of the decline in cryptocurrency values.
What are traders to look out for?
Major altcoins and a well-known meme coin saw price declines on Wednesday, but the biggest cryptocurrency by market capitalization saw sideways trading.
Since hitting a new all-time high of $123,218 on July 14, the price of Bitcoin has been fluctuating between $116,000 and $120,000. At $120,000, it saw a minor rejection from its upper consolidation range on Wednesday, closing at $118,755. As of Thursday, when this article was written, it has somewhat recovered, trading at about $119,200.
Traders should keep a close eye on the previously mentioned Bitcoin consolidation levels to predict whether the price of BTC will level off or go into a more severe correction phase, which will affect the prices of other cryptocurrencies.
Altcoins and other cryptocurrencies are likely to follow if Bitcoin continues to rise and closes above the upper limit of the consolidation range at $120,000 on a daily basis. This could lead to a new all-time high of $123,218.
Conversely, if Bitcoin consistently drops below the lower consolidation boundary at $116,000, it may continue to slide until it retests the 50-day Exponential Moving Average (EMA) at $111,292, which would trigger a more aggressive corrective phase for altcoins.
Additionally, on Thursday, CryptoQuant’s Bitcoin Estimated Leverage Ratio (ELR) was 0.263, which indicates that the market is moderately leveraged but not overexposed.
