Over the fall of 2021, the cryptocurrency market skyrocketed with total market capital exceeding $3 trillion. Bitcoin led the charge, surging over $99,000, pushing above that level at one point in the early Asian trading day. A stimulus announcement expected from former US President Donald Trump jumpstarted a record market rally. This spike was propelled by upbeat sentiment permeating throughout Asian stock markets.
The rally came at a price, too. A big liquidation event happened on Binance. The biggest single liquidation was a BTCUSDC market order worth $10.59 million. Within the past 24 hours, a shocking 106,273 traders were liquidated. While most of them did, a staggering 71.43% were in leveraged short positions. The combined liquidations reached $291.907 million, a testament to the crypto market’s unpredictable and highly volatile environment.
Trump's Announcement Fuels Market Optimism
For example, former US President Donald Trump’s announcement of a major trade deal was enough to send the crypto market crashing. Trump revealed the agreement in a post on his Truth Social platform, stating that he would hold a news conference at 10:00 AM in Washington, DC (3:00 PM BST). The news conference was intended to announce an agreement with "representatives of a big, and highly respected, country."
The cryptocurrency market exploded as a result of this announcement. Investors interpreted it as definitive proof of advancing global economic cooperation and stabilization. This positivity underpinned much of the overall bullishness seen in the crypto market. The Asian equity markets were all on board with this optimism, all trading into the green on Thursday.
Bitcoin's Breakout and Liquidation Cascade
Bitcoin’s break through $99,000 proved to be the tipping point, pushing the entire crypto market up with it. This breakout triggered a wave of liquidations, especially among the traders with short positions that were being held with extreme leverage. According to Coinglass data, 71.4% of all leveraged shorts were liquidated in this stretch.
Coinglass’ Liquidation Map chart captures the scope of these liquidations in a dramatic, vibrant visual. Specifically, it chronicles the places where losses disproportionately bulk up on specific captive trade platforms. The $10.59 million liquidation on Binance reminds us of the risks associated with leveraged trading. It’s another sharp reminder of the extraordinary volatility in the cryptocurrency market. The large percentage of liquidated short positions means a lot of traders were shorting Bitcoin’s ascent. Needless to say, they were unprepared for such a wave of unexpected applicants.
Market Correction and Future Outlook
Although the cryptocurrency market is still in the green today on Thursday, analysts are warning of a major trap. This wave of liquidations was very large signalling a potential correction and further market volatility. Traders need to be smart and be sensitive to the level of risk they are exposed to. We’ll soon find out how the market will respond to Donald Trump’s inevitable coronation. The specific terms of that trade agreement will be critically important to determining what that response looks like.
Overall, the long-term outlook for the cryptocurrency market is extremely bullish, thanks to accelerating institutional adoption and rapidly developing mainstream awareness. Volatility in the short-term is unlikely to go away, with traders needing to be ready for large swings in price. Prudent consultation, due diligence, and risk assessment are going to be the key for moving forward safely in this fast-moving cryptocurrency environment.
