The cryptocurrency market took a dramatic plunge on Tuesday evening, triggering a wave of liquidations. Bitcoin, the leading cryptocurrency, fell below $59,000, marking its lowest point since August 19th. This decline came after Bitcoin had surpassed $63,000 earlier in the day. Ethereum, the second-largest cryptocurrency, experienced an even steeper drop, plummeting to an intraday low of $2,400 – a level not seen in nearly three weeks.
Over $207 million was liquidated from the market within the last four hours, bringing the total 24-hour liquidations to $315 million. Nearly $283 million in leveraged long positions were wiped out, representing the highest level of liquidation since the market rout on August 5th. Bitcoin’s Open Interest, a measure of the total value of outstanding contracts, plummeted by 7.68% in the last 24 hours, further indicating large-scale liquidation of long positions.
The Cryptocurrency Fear & Greed Index, a gauge of market sentiment, flashed “Fear” at the time of this writing, highlighting substantial selling pressure.
Meanwhile, the global cryptocurrency market cap stood at $2.07 trillion, collapsing by 5.93% in the last 24 hours. This decline stands in contrast to the gains seen in the stock market on Tuesday. The S&P 500, a broad-based stock market index, gained 8.96 points, or 0.16%, to close at 5,625.80. The tech-heavy Nasdaq Composite added 0.16% to close at 17,754.82, while the Dow Jones Industrial Average rose 0.02% to finish at 17,754.82, marking its second consecutive record close.
The rally in the stock market was fueled by anticipation for the second-quarter earnings of AI giant NVIDIA Corp. (NVDA), which has been a leading indicator for all things technology and AI this year. Shares of Nvidia closed 1.46% higher on Tuesday.
Several analysts have weighed in on the recent cryptocurrency market downturn. Santiment, a popular analytics firm, attributed the retracement to extreme funding rates on derivatives exchanges like dYdX. The firm pointed out a spike in over-leveraged long bets on August 25th, followed by a downward trend in the market. Santiment emphasized that extreme funding rates in either direction often lead to liquidations and market reversals. The firm advised investors to wait for funding rates to cool down before becoming optimistic again.
Rekt Capital, a widely-followed cryptocurrency analyst, interpreted Bitcoin’s move as a post-breakout retest of a downtrending channel. The analyst believes that a successful retest of the channel’s top would confirm the breakout and potentially lead to further upside continuation.
The recent cryptocurrency market plunge serves as a reminder of the inherent volatility in the digital asset space. While analysts remain cautiously optimistic about the long-term prospects of cryptocurrency, the short-term outlook remains uncertain as the market navigates through volatile funding rates and potential market corrections.
