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$850 Million Liquidated as Bitcoin, Ethereum Dip

Volatility is back in the cryptocurrency market, leading to significant losses in the last few hours.

Shutterstock cover by Motortion Films

Key Takeaways

  • More than $210 billion was shaved off the entire cryptocurrency market capitalization today.
  • The flash crash resulted in over $850 million worth of liquidations.
  • The funding rates across all derivative trading platforms point to a steeper correction.

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The cryptocurrency market has taken a steep nosedive after posting steady gains throughout October. Although some lower cap assets have rebounded, traders appear to be overleveraged, leading to another downswing. 

Crypto Market Suffers Crash

Volatility remains rampant in the cryptocurrency market despite the beginning of a new uptrend. 

Roughly $210 billion has been wiped from the entire cryptocurrency market capitalization in the last few hours. The sudden flash crash resulted in more than $850 million worth of long and short positions liquidated across the leading crypto derivatives trading platforms. 

Bitcoin, Ethereum, and most other lower cap assets were affected by the downswing. 

Crypto market heat map
Source: Coin360

Only a handful coins are up today. Aave, 1inch, and Mask Network surged in tandem shortly after Korean exchange Upbit announced it would list their tokens. Likewise, Shiba Inu has been posting higher highs on rumors that Robinhood will add it to its crypto-related offerings.  

Red Flags Appear

Although it appears that the correction could be over, there are a few signals that point to a deeper correction. The estimated leverage ratio across crypto derivatives exchanges is about to hit a yearly high. 

Favorable funding rates of 0.1% or higher every eight hours are generally considered unsustainable. Higher rates suggest that market speculators are more optimistic as long traders pay short traders’ funding. When this happens, traders can begin to feel so-called “euphoria” in their positions, which often leads to steep corrections.

Data from CrytoQuant reveals that Bitcoin’s estimated leverage ratio across all exchanges is hovering around 0.19%, a negative signal for the continuation of the uptrend. 

crypto exchange leverage ratio
Source: CryptoQuant

Funding rates across all derivatives trading platforms may need to normalize for the cryptocurrency market to maintain a healthy bull run. Although a rally could continue without a reset of the funding rates, the market could see a similar event to today’s flash crash. 

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