On January 7, 2024, the cryptocurrency landscape is grappling with a notable downturn, echoing through the market as prices plummet and liquidations surge. This downward spiral has led to long liquidations reaching staggering amounts, affecting traders and investors worldwide. In the midst of this financial turbulence, Bitcoin (BTC), the leading digital currency by market capitalization, has seen its value drop by over 5%.
$293 Million of Crypto Liquidations
The rapid decline in prices has taken Bitcoin down from $102,060 to $96,865 in just a few hours. This abrupt shift has resulted in liquidations worth $293 million within a four-hour window, according to data from Coinglass, an on-chain analytics firm. The trend of increasing liquidations suggests that the price downturn might persist, potentially causing further financial instability in the market.
Breaking down the $293 million in liquidations reveals that a staggering 90% stemmed from long positions. Specifically, $266.18 million worth of long positions were liquidated, while short liquidations accounted for $25.7 million. This imbalance highlights the vulnerability of long positions in the current market climate.
Other major cryptocurrencies are not immune to this decline. Ethereum (ETH), Solana (SOL), Dogecoin (DOGE), and Cardano (ADA) have experienced significant price drops of 7%, 6.2%, 8.5%, and 8%, respectively. However, XRP, the native token of Ripple Labs, is defying the trend, showing a 1.5% increase in its value.
Reason Behind the Crypto Crash
Many investors are questioning the causes of this sudden and dramatic downturn in the cryptocurrency market. A key factor contributing to this crash is the recent surge in U.S. Treasury yields over the past decade. The Institute for Supply Management (ISM) has released a report indicating that the December Purchasing Managers’ Index (PMI) for the private sector was 54.1, up from November’s 52.1.
This data has not only impacted the cryptocurrency market but also triggered a notable decline in U.S. equities, fueled by concerns over inflation. As a result, companies heavily invested in cryptocurrencies, such as MicroStrategy (MSTR), have also suffered, witnessing a price drop of over 10%.
The interconnectedness of global financial markets means that fluctuations in traditional financial instruments can have ripple effects on the cryptocurrency space. Investors are now closely monitoring economic indicators and market trends to navigate these volatile times.
