Bitcoin Drops Nearly 11% Tuesday on Whale Leverage Liquidations

ByBit Reports $1.41 billion in bitcoin, $878.58 million in ether positions ‘rekt’ in the last 24 hours

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Source: Shutterstock

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key takeaways

  • The first trading day after the labor day long weekend was a volatile one for the crypto and equity markets
  • Even though many exchanges had moved to limit leverage available to retail traders, liquidations appeared to have a cascading effect putting down prices

As traders in the US and Canada went back into the office after Labor Day, the market for both equities and crypto proved to be quite volatile bringing down prices of both assets Tuesday morning.  

The price of bitcoin dropped by nearly 11% during the first hours of the Tuesday US trading day hitting approximately $46,7561 before recovering to $47,170. At the height of the sell-off, prices were down to almost $42,000 on some exchanges.  

According to ByBt’s liquidation tracker, nearly $3.5 billion in positions was liquidated during the past 24 hours with $2.87 billion of that occurring in the first four hours of the business day in the US. Bitcoin, ether, and Solana suffered some of the steepest liquidations, with $1.41 billion of bitcoin positions being liquidated in the last 24 hours, $878.5 billion of ether getting liquidated, and $108.4 million in Solana getting rekt. 

ByBit liquidiations
Source: ByBit

The liquidations were largely focused around Bybit, Huobi, Binance, and FTX. One trader that spoke to Blockworks speculated that long positions set up by traders in Asia on Huobi and Binance before the US business day began were one of the catalysts to set things off. 

Bitcoin derivatives exchange Bitmex, which focuses on an institutional and Degen clientele, suffered some of the lowest total liquidations coming in at 93.6 million compared to Huobi’s $860 million or Binance’s 725.5 million. 

Exchange outages

Many exchanges continued to have problems with outages, as is the case with many rapid market selloffs. On Twitter, many traders complained about difficulties logging into Binance and Coinbase which once again seemed to buckle under the stress. 

FTX — which largely remained online and accessible — CEO Sam Bankman Fried told Blockworks that his exchange was able to withstand the pressure because “We’ve spent a lot of time over the last few years working on making our matching engine scalable and parallelizable while still maintaining cross margin, allowing the exchange to withstand intense load gracefully.”

Within the industry FTX is known to be one of the most resilient trading platforms, as it also remained accessible during May’s epic market crash when $8 billion was liquidated and the price of bitcoin was sent hurtling down to $35,000 because of a cocktail of factors from ESG concerns to China FUD, and Elon Musk’s ramblings. At the time, one FTX developer Blockworks spoke to credited the exchange’s continued operations to their ‘Chad’ development team. 

“Bound to be a Correction”

David Gan, a former Managing Director at Huobi, and now a General Partner at digital asset VC fund OP Crypto, credited the crash to whales looking to take profit and take advantage of over leveraged traders. 

“There was bound to be a correction. The market was great for the last few weeks. There’s not any particular reason for this, Gan told Blockworks. “There’s no China FUD; the movement of miners to the West has provided a more decentralized hashrate.” 

Gan said that part of the reason likely has to do with a downturn in the traditional markets, and traders liquidating their crypto holdings to fill some positions on the equities side. 

Calvin Chu, Council member and core builder at Impossible Finance, added that this is also a matter of market volatility accelerating things despite the leverage offered to traders being curtailed across the board. 

“Volatility across various platforms is always bound to happen, and with the recent news of El Salvador making bitcoin a national currency, there’s bound to be some drawbacks after positive news,” he told Blockworks. “With many platforms these days offering leverage, small swings can lead to larger cascades, so it’s always important for users to be careful when trading and do their own research prior to investing.”

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