Crypto Market Dives as Leverage Takes a Toll Again

The cryptocurrency market faced another sharp downturn, with $1.58 billion in leveraged positions liquidated over the past 24 hours. The market’s overall value tumbled by 7.5%.

Liquidations Hit Once Again

A steep market correction led to $1.58 billion in liquidations within hours on Monday, as Bitcoin suffered its second flash crash in a week. 

Bitcoin dropped 6.9%, while Ethereum declined over 12%, dragging the altcoin market down by 7.5%.

The crypto market suffered the second massive liquidation during the week. Source: CoinGlass

According to analytics firm CoinGlass , 88.3% of the liquidated positions were leveraged longs, amounting to $1.39 billion, while short positions saw a comparatively smaller loss of $184.27 million. Leveraged trading allows investors to borrow funds to amplify their potential returns, but it also increases risk.

Bitcoin trading pairs accounted for $137.17 million in long liquidations, 79% more than shorts. Ethereum led the losses, with $202.48 million in long positions wiped out. 

Most top altcoins also endured significant liquidations, though none exceeded $100 million. Dogecoin recorded the biggest $77.77 million in long liquidations and $10.5 million in shorts.

Crypto Prices Slide Down

Bitcoin’s price plunged from over $101.2K to $94.15K on Monday before partially recovering to $97.7K at the time of writing. 

Ethereum experienced a steeper fall, dropping from recent highs of $4K to $3.5K before rebounding above $3.7K. Dogecoin struggled to hold key support, falling to $0.38 intraday before recovering to $0.422 as of the time of writing.

What Triggered The Pullback?

While a correction seemed inevitable following November’s impressive market growth, the exact cause of Monday’s sharp decline remains unclear.

Market participants speculate that activity by Bhutan’s government could have played a role. Blockchain analytics firm Arkham Intelligence’s data shows that a wallet tied to Bhutan’s Royal Government transferred 406 Bitcoin (worth over $40 million at Monday’s highs) to Singapore-based broker QCP Capital on December 9th, which subsequently sent the funds to Binance.

Bhutan, a top-five government Bitcoin holder, currently holds 11.688K Bitcoins valued at $1.14 billion.

Adding to the uncertainty, Google CEO Sundar Pichai announced the launch of Willow, the company’s first quantum computing chip, capable of performing calculations in under five minutes that would take modern supercomputers “10 septillion years.”

The announcement raised concerns in the crypto community about quantum computing’s potential to disrupt cryptocurrency mining. 

However, Bitcoin expert Tyler Durden from Digital Asset Fund Soup Capital clarified that Willow is far from capable of cracking Bitcoin encryption.

“Willow has 105 Qubits. To crack Bitcoin, you’d need between 200–400 million Qubits,” Durden explained.

Quantum bits, or qubits, are the foundation of quantum computing, allowing these systems to process multiple calculations simultaneously, but their current capacities are still far from threatening Bitcoin’s security.

On The Flipside:

• A correction was necessary after the intense crypto price surge in November. While crypto traders remain cautious, anticipating further price declines, the recent pullbacks present a “buy-the-dip” opportunity for investors.

Why This Matters

The recent crypto market correction highlights the risks of excessive leverage, with over-leveraged positions suffering significant losses.

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