Massive Long Liquidation Wave Hits Crypto Market, Total Market Cap Dips by $400 Billion
A substantial number of long positions worth over $800 million have been liquidated in the cryptocurrency market in the last three days, marking the most severe liquidation events since April, based on CoinGlass data.
During a significant sell-off in the cryptocurrency market, the total market capitalization of the space has declined by more than $400 billion in the past month and over $65 billion in the last 24 hours. Bitcoin’s price dropped to slightly above the $53,000 level before beginning a recovery.
- Bitcoin is currently trading at $55,200.
- Ethereum slipped below $3,000 to trade at $2,950.
- Other major cryptocurrencies like BNB, Solana, XRP, TON, and DOGE have all witnessed double-digit declines over the last week.
- DOGE saw a significant 22% decrease in its value during this period.
Impact of Halving Event and German Government on Market Dynamics
According to Bloomberg reports, Bitcoin miners, who secure the network utilizing powerful machines and receive BTC rewards, are still grappling with the financial repercussions of the halving event in April. The coinbase reward per block found by miners was halved as a result of this event.
Following this development, some miners have been compelled to sell portions of their Bitcoin holdings. The selling pressure has been exacerbated by the German government, which has been transferring funds from a wallet containing over 46,000 BTC to cryptocurrency exchanges. Initially, the German government possessed nearly 50,000 BTC seized from the operators of the defunct film piracy platform Movie2k.to.
- Defunct exchange Mt.Gox has initiated the repayment process for creditors, putting an end to a decade-long wait for the return of digital assets.
- The exchange, which once dominated Bitcoin trading volumes, faced a security breach in 2014 leading to the loss of around 740,000 BTC and eventual bankruptcy.
- Analysts anticipate that creditors will sell returned BTC on the market post the 10-year waiting period.
Decline in Miner Revenue and Transaction Fees
Analysis by CryptoQuant indicates a 75% drop in daily miner revenue post the halving event, now standing at $26.5 million. Transaction fees earned by miners have also witnessed a sharp decline, accounting for only 3.7% of their total revenue compared to a peak of 75% in April.
Le Shi, head of trading at Auros, a market maker and algorithmic trading firm, notes that the $51,000 to $52,000 range is a critical point as many Bitcoin miners are nearing their break-even point for profitable mining operations.
Hot Take: Brace for Market Volatility Amid Long Liquidation Wave
The cryptocurrency market is experiencing heightened volatility following a massive wave of long position liquidations worth over $800 million. Factors such as the impact of the halving event on miner finances, German government fund transfers, and Mt.Gox creditor repayments are contributing to this volatile environment.
Market participants should brace themselves for continued fluctuations as the market navigates through these challenges, with the $51,000 to $52,000 range being closely watched by Bitcoin miners for profitability concerns.
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