Cryptocurrency Market Hit by Massive Liquidations, Hundreds of Millions Wiped Out
Cryptocurrency investors witnessed quite the rollercoaster ride on December 5th, 2024, as Bitcoin skyrocketed past the significant $100,000 threshold, only to immediately experience a sharp flash crash that wiped out hundreds of millions in leveraged positions within just 24 hours.
The upheaval began on Thursday evening European time when Bitcoin’s price plummeted from $96,200 to $90,600 in a single minute—a rapid 5.8% decline that triggered massive liquidations across major exchanges.
Although Bitcoin quickly recovered to around $96,000, data from CoinGlass revealed that over $869.91 million worth of leveraged positions were liquidated within the same day. Long position traders bore the brunt of these losses, with a total of $703.35 million liquidated as they pinned their hopes on continuous price growth. Meanwhile, short sellers faced relatively smaller losses amounting to $166.56 million.
During the flash crash, OKX clients suffered the most significant blow with $378.7 million in liquidations. Binance traders weren’t far behind, encountering $241.6 million in losses, while Bybit users saw nearly $132 million evaporate as the crypto market turmoil unfolded.
The impact wasn’t limited to one side of the market, as Bitcoin traders endured the heaviest losses, with $415.6 million wiped out in long positions and $71.52 million in shorts within 24 hours. Ethereum traders faced lesser casualties, with $67.24 million in longs and $18.26 million in shorts liquidated.
Some market experts suspect that the sudden crash might have been influenced by market manipulation, attributing it to the prevailing bull market environment, where perpetual swaps hold more liquidity than spot markets while being tied to spot prices. This situation enables traders to trigger a sharp drop in spot prices by selling off their holdings, which forces perpetual swap prices to follow, allowing them to profit from short swap positions while containing any spot losses.
As the crypto market gains traction, surprises like these may become more commonplace, especially with the increasing involvement of large institutional players. These major traders could exploit liquidity gaps, precipitating sharp price drops that lead to liquidations and amplify retail losses.
Overall, the crypto market is at the onset of its bull cycle, showcasing impressive gains in recent months. However, the full potential of growth has yet to be realized, and not all coins have entered the price discovery phase. Investors should remain vigilant and well-informed to navigate these turbulent waters and avoid substantial losses.
