Cryptocurrencies experienced a major downturn on Monday, with traders losing over $1.5 billion in bullish bets. This wave of liquidations was the largest since March 27, triggering a sharp selloff that sent Ether and other cryptocurrencies plunging.
The overall digital-asset market capitalisation fell below $4 trillion as a result of the selloff, according to data from CoinGecko.
Ether and Bitcoin take a hit
Ether (ETH) was particularly affected, falling as much as 9% to $4,075 as nearly half a billion dollars of leveraged long positions in the second-largest token were liquidated, according to data compiled by Bloomberg.
Bitcoin, the largest cryptocurrency, also saw a decline, dropping 3% to $111,998 at one point. Other coins like Solana, Algorand and Avalanche also saw their prices plunge.
Is crypto market losing steam?
The recent surge in crypto prices, which drove Bitcoin and Ether to all-time highs in August was largely fuelled by demand from publicly listed firms setting up digital-asset treasuries to hold tokens.
However, this momentum appears to be fading as shares of digital-asset treasury firms ranging from Michael Saylor’s Strategy to Japan’s Metaplanet have retreated.
“It feels like the market needs a breather, with some participants concerned that the ‘DAT-trade’ is losing steam and there are no more meaningful inflows on the horizon,” said George Mandres, senior trader at XBTO Trading, using the acronym for digital-asset treasuries.
Trader sentiment
The liquidation event was massive on Monday, with more than 407,000 traders’ positions liquidated over a 24-hour period, the Coinglass data show.
Data from CryptoQuant show that the funding rate for Ether perpetual futures, which refers to the fee paid between traders to keep leveraged positions open, has turned negative. This indicates that short sellers are dominating the market and paying long holders to maintain their positions.
While Ether and Solana were previously in the spotlight, rallying 74% and 52% respectively since the start of July, Bitcoin has been trading in a relatively tight range of $110,100 and $120,000 since the beginning of July, with subdued volatility.
In contrast, gold, which is often compared to Bitcoin as a store of value, notched near-daily records. Gold reached an all-time high of almost $3,720 an ounce on Monday. Silver also gained during the same period, Bloomberg reported.
A major factor pushing gold and equities higher is the easing of US monetary policy, although Bitcoin has had a more muted response to the Federal Reserve’s quarter-point rate cut last week. Bloomberg-compiled data show that several of the top crypto tokens are now nursing double-digit losses over the past five days.
