Crypto Carnage: Bitcoin and Ether Rollercoaster Sparks $400M in Liquidations, Biggest Since August

"Bitcoin and Ethereum Experience Volatile Price Swings, Resulting in $400 Million in Liquidated Trades"

Thursday witnessed significant price fluctuations in the two largest cryptocurrencies, bitcoin (BTC) and Ethereum’s ether (ETH), resulting in over $400 million worth of open trades being liquidated. This marked the highest liquidation since the crash in August. The volatile session occurred amidst the surging prices of BTC and ETH, driven by the growing interest in crypto from Wall Street. Both cryptocurrencies reached significant milestones that they had not seen in recent times. BTC surpassed $36,000 and then $37,000 for the first time since May 2022, nearly reaching $38,000 before retracing its gains. Similarly, ETH crossed the $2,000 mark, reaching its highest level since the April Ethereum upgrade known as Shanghai. The optimism surrounding ETFs and the potential influx of funds into the industry contributed to the upward movement.

Earlier this week, CoinDesk reported that Grayscale was engaged in discussions with two key departments of the Securities and Exchange Commission (SEC) regarding the conversion of its bitcoin trust, GBTC, into an ETF. Subsequently, on Thursday, it was revealed that BlackRock had registered a new corporate entity called the “iShares Ethereum Trust” in Delaware, a state where many corporations establish their presence. iShares is the ETF division of BlackRock. The filing was made by BlackRock Advisors, a division of the world’s largest asset manager. Notably, the company had incorporated the iShares Bitcoin Trust in the state a week before officially filing paperwork for a BTC ETF in June.

BTC was trading around $35,200 before the surge, but following the news about ETH, it began to decline and eventually reached approximately $36,400. The extreme volatility during this period resulted in a significant wipeout of leveraged positions, with $241 million in short positions and approximately $200 million in long positions being liquidated across all crypto assets, according to CoinGlass data.

Liquidations occur when an exchange forcibly closes a leveraged trading position due to the trader’s partial or total loss of funds or insufficient funds to keep the trade open. This dynamic can amplify volatility as traders cover their positions, thereby eliminating excessive leverage from the market. Thursday witnessed the highest number of liquidations in a single day since August 17, when cryptocurrencies experienced a sharp sell-off, with BTC dropping to as low as $25,000 from around $29,000, resulting in $1 billion in liquidations.

The open interest (OI), which refers to the total value of open options and futures contracts held by market participants for crypto derivatives, declined from over $26 billion to below $24 billion, as traders either closed their leveraged positions or were compelled to do so.

“12% (-$3b) Total OI wipeout in a few mins on the anniversary of the FTX collapse,” tweeted Hsaka, a widely followed crypto trader, on X (formerly Twitter). “Poetic.”

In conclusion, Thursday’s trading session witnessed significant price swings in BTC and ETH, leading to a substantial liquidation of open trades. The surge in interest from Wall Street and the potential introduction of ETFs fueled the upward movement. However, the extreme volatility resulted in a wipeout of leveraged positions, with liquidations totaling over $400 million. The market also experienced a decline in open interest for crypto derivatives.

Martin Reid

Martin Reid

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