What to know:
- Crypto markets faced $770 million in liquidations on Monday, approaching the monthly high recorded on January 18.
- Solana (SOL) and Dogecoin (DOGE) tumbled over 10%, leading declines among major cryptocurrencies, while Ether (ETH), BNB (Binance Coin), XRP, and Cardano (ADA) decreased by as much as 9%.
- Major liquidation events can offer insights into market sentiment and positioning.
Bullish bets on rising crypto prices led to a loss of $770 million in just 24 hours as Bitcoin fell below $100,000, resulting in significant losses for several major cryptocurrencies at the start of the week.
Solana and Dogecoin dropped more than 10%, while ETH, BNB, XRP, and ADA saw declines nearing 9%. Overall, the market cap contracted by 8.5% by Monday afternoon in Asia.
Tokens outside the top twenty also experienced declines, with notable losses seen by Pepe (PEPE), Aptos (APT), Gate (GATE), and Virtuals (VIRTUALS), which plummeted as much as 18%.
The only token in the green was Jupiter (JUP), gaining 3.5%, attributed to a decision to buy back tokens from the open market funded by trading platform fees, potentially resulting in net buying volumes in the hundreds of millions throughout the year.
Bitcoin saw a sharp decline under $99,000, as traders took profits ahead of the first U.S. FOMC meeting of the year. This decline mirrored downturns in U.S. stock futures as market participants assessed the costs and capabilities of DeepSeek, a China-based company, disrupting narratives driven by OpenAI.
In the futures markets, traders handling BTC-tracked products experienced losses totaling $238 million within a 24-hour frame, especially during early European and Asian afternoon hours. SOL and DOGE wagers lost about $50 million, while altcoin-tracked products lost $138 million and ether-tracked futures lost $84 million.
The largest liquidation occurred on HTX, involving a BTC trade margin valued at $98.4 million.
Liquidation refers to a situation where traders lack sufficient funds to maintain a leveraged position. Given the high volatility of the crypto space, such events are common. Nevertheless, major occurrences like Monday’s events can provide significant indications for further market sentiment and trading positions.
Liquidations signify an overstretched market, suggesting that price corrections might have occurred. Areas on price charts with high liquidation volumes could offer support or resistance levels where price movements may reverse due to diminished selling from liquidated positions. If the market continues its decline, those with short positions may interpret this as validation, subsequently increasing their bets. Contrarily, contrarian traders might see significant liquidation as a potential buying opportunity, anticipating a price rebound when selling pressures ease.
