What happened?
The crypto market experienced a significant drop on Tuesday, with a 2% fall translating to roughly $3.9 trillion. Bitcoin dipped towards $112,000, resulting in a loss of the week’s gains. Additionally, approximately $1.7 billion in liquidations amplified the sell-off as leveraged positions were dissolved.
Who does this affect?
This development impacts all participants in the crypto market, particularly those who held long positions, which experienced the biggest liquidation event of the year with about $1.7 billion wiped out. On a broader scope, this also affects the sentiment in the market, with traders now harbouring caution.
Why does this matter?
This dramatic shift matters because it signifies a marked volatility in the crypto market that could potentially indicate a broader financial impact. Historical data suggests these ‘leverage washes’ often precede a period of consolidation, setting the stage for the next sustained market increase. The event may also impact decisions regarding future buy-ins and trades.