Bitcoin flash crash liquidates $165M of leveraged positions in 2 hours

The Bitcoin price flash crash on March 2 left leveraged traders nursing serious burns with over $165 million worth of long positions liquidated in less than 2 hours. The leading cryptocurrency plunged by 5% from $69,450 to $65,970 within a span of 30 minutes early on Tuesday morning. 

According to data from Coinglass over 150k traders with positions on various cryptocurrencies were wiped off within 24 hours of the plunge. To compound the investors woes, cryptocurrency prices have continued to decline erasing any potential signs of recovery, with Bitcoin currently trading around the $64,600 mark.

Bitcoin Sneezes, Altcoins catch a cold

The carnage spilled throughout the entire crypto market as Bitcoin’s price decline brought down with it other cryptocurrencies.

As typically observed, the altcoin markets experienced more significant declines. Ethereum declined by 6.5%, dropping to $3,350, which represents a rebound of over 30% from its highest price. Following its notable surge, Solana experienced an 8.5% drop to $185, while Dogecoin plummeted by 11% to $0.192. Other Altcoins like Avalanche, $48, Shiba Inu, Bitcoin Cash, and Litecoin experienced a double digit drawdown indicating their vulnerability to Bitcoin’s price movement.

Over $500 million liquidated in Altcoins positions

As reported by Coinglass, Bitcoin’s sudden downward movement resulted in the liquidation of over $500 million worth of leveraged positions. Notably, the great majority of these liquidations—roughly 84.19%—came from extended holdings. The two exchanges that saw the most liquidations were Binance and OKX, with $202.84 million and $176.48 million, respectively.

The majority of these losses were attributed to long positions in Bitcoin, totalling just over $165 million, and in Ether, amounting to more than $40 million. Additionally, approximately $6 million in long positions on Dogecoin and $4 million in Solana were also liquidated, although trailing behind Bitcoin and Ethereum in terms of losses incurred.

Bitcoin ETF performance dips

Coinciding with the price downturn, Bitcoin exchange-traded funds (ETFs) recorded a net outflow of $86 million, breaking a streak of four consecutive days of positive inflows, according to data from FarSide. Among the ETFs, BlackRock’s fund emerged as the top performer, witnessing a net inflow of $165.9 million, followed by Fidelity with $44 million. However, these inflows were offset by Grayscale’s GBTC, which experienced outflows totalling $302 million, resulting in a net daily outflow of $85.7 million across all funds.

Renowned Bitcoin critic and Goldbug, Peter Schiff was quick to comment on Twitter and dance on the grave of the liquidated investors stating that a 4.5% Bitcoin price drop is equivalent to a $100 drop in the price of Gold in 10 minutes. He further added that ETF investors were trapped until the NYSE opens tomorrow.

Nonetheless Bitcoin analysts remained unfazed stating that the asset was just behaving accordingly and the sharp decline served to test support levels, which is necessary in its long term price movements.

Although it might appear concerning to those new to cryptocurrency, this level of market volatility and the subsequent flushing out of leveraged positions are typical features of crypto markets. Such fluctuations are considered healthy as they help to restore prices to non-leveraged levels.

Analysts are still cautious and predict that Bitcoin’s price may continue to fall considering its recent market performance and ensuing investor sentiment. As such, traders, especially novice investors should exercise caution while engaging in the market to minimise risks of liquidations and being caught on the wrong side of Bitcoin’s usually wild price movements.

Image courtesy of Flickr

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