Bitcoin and the broader cryptocurrency market suddenly fell as long positions reached a level not seen since the June 28 crash.
The largest cryptocurrency, Bitcoin, fell more than 7% in a matter of hours on Tuesday, with the asset briefly falling to $58,000. This triggered a broader market capitulation, with altcoins falling significantly.
Although the cryptocurrency market is widely known for its volatility, price movements of this magnitude always have an underlying cause. Here’s the reason for this sudden collapse.
Long-term traders have gotten greedy
Data from Santiment Long positions on cryptocurrency exchange dYdX suddenly reached levels comparable to those seen when Bitcoin hit its all-time high in March. Such spikes saturated the market and caused a move in the opposite direction.
A similar trend was observed on July 28, when long-term traders got greedy amid a booming Bitcoin price. The glut, caused by large long positions, saw Bitcoin drop to $58,000.
Santiment’s data also highlighted a reverse trend. August 5thas short positions on dYdX surged as Bitcoin fell below $50,000. Heavy short trading volume was seen on the California-based exchange, prompting the market to shed eager traders with an upward trend.
Dump bulls
This sudden surge triggered a wave of liquidations in the cryptocurrency market, with bulls taking the brunt of the blow. Data shows that more than $320 million of trading positions were liquidated in the last 24 hours.
Surprisingly, Ethereum bulls were the most worried, as over $93 million worth of long positions were wiped out of the market in the last 24 hours. Around $9.6 million worth of late short positions were also liquidated, as ETH recovered slightly to $2,476.
Bitcoin traders also saw substantial liquidation, as $96.56 million worth of positions were wiped out of the market. $85.42 million were long positions, while $11.13 million were short positions. At press time, Bitcoin was trading at $59,438.
Other assets also saw spikes in liquidation as altcoins bled terribly. SOL, PEPE, and XRP traders lost $12.12 million, $4.3 million, and $3.15 million, respectively. SOL traded at $147, while XRP recovered slightly to trade at $0.57.
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