- The total liquidations across the crypto market surpassed $875 million after Bitcoin fell below $100,000.
- Bitcoin long liquidations also surged to a record high of $416 million.
The cryptocurrency market recorded a massive surge in liquidations in the last 24 hours, which wiped out over $875 million in leveraged long and short positions, marking the highest volume of liquidations since 2021.
Per Coinglass data, long liquidations totaled $702 million while short liquidations came in at $173 million. These liquidations affected more than 157,000 traders.
Source: Coinglass
Traders betting on Bitcoin [BTC] gaining further recorded the most losses, with long BTC liquidations reaching $416 million. These positions were closed after the king coin experienced a sudden spike in volatility, which saw the price fall from above $100,000 to $92,000 in under four hours.
Altcoins also saw a slight spike in volatility. Ethereum [ETH] price fluctuated between $3,600 and $3,900 causing $85 million in liquidations. XRP [XRP] saw the third-highest level of liquidations of $40 million while Dogecoin [DOGE] recorded $22 million in liquidations.
This sudden surge in liquidated trades and volatility may have been a forced correction after overleverage caused a market imbalance.
Liquidations surge due to an overleveraged market
According to CryptoQuant, Bitcoin funding rates reached a multi-month high of 0.0663 on 5th December, suggesting that long positions were increasingly dominant.
Whenever funding rates reach extreme levels, it tends to precede a sharp move in the opposite direction of which traders are anticipating the price to go.
Therefore, after a buildup of long positions, a long squeeze ensued that triggered forced selling and caused funding rates to decline.
Source: CryptoQuant
The estimated leverage ratio clearly shows the market correction. This metric recorded a sharp rise to a seven-day high, as traders increased their leverage on Bitcoin. It later declined due to overleveraged positions being closed.
MVRV ratio shows there is still room for more gains
Bitcoin’s market value to realized value (MVRV) ratio shows that despite the recent correction, BTC has yet to reach its local top.
Read Bitcoin’s [BTC] Price Prediction 2024-25
The MVRV ratio, at press time, stood at 2.5 suggesting that the asset was still fairly priced. In the last three months, Bitcoin’s MVRV ratio has increased from 1.72 as profitability for holders increased.
Source: CryptoQuant
A surge in the MVRV ratio past 3.5 will signal that Bitcoin has reached a local top. Therefore, traders should watch out for a further rise in this metric to overvalued levels.
