Crypto Market Suffers US$1B in Liquidations as Bitcoin Slumps

Bitcoin and Ethereum bleed after sudden liquidation; Altcoins tumble up to 18%

Bitcoin, Ethereum, BNB, and other major altcoins are trading in deep red. Over the last few hours, a sudden liquidation led to the suffering of US$1 billion as digital-asset markets suffered one of their worst sell-offs of the year, and bitcoin's price fell to a two-month low.

The largest cryptocurrency in the market plunged on Thursday as traders sold the tokens based on several unrelated catalysts, causing the crypto market to lose 6.7% in overall capitalization in one of the biggest drops in recent months. In the past 24 hours, Bitcoin fell as much as 9% to US$25,000 from US$28,500 on Binance, leading to a market-wide fall that sent major tokens like litecoin (LTC) tumbling by 14%.

"When you throw in what is happening in the bond market, it becomes easy for Bitcoin prices to soften," Edward Moya, senior market analyst at Oanda, said in a note. This huge crash has almost undone all the gains BTC made as a reaction to BlackRock's surprise filing for a Bitcoin ETF on June 15.

According to Wall Street Journal report, the aerospace giant had roughly US$373 million in BTC holdings on its balance sheet between 2021 and 2022. While neither SpaceX nor Elon Musk has commented about this BTC offload, this move signifies a strategic shift in the company's financial portfolio.

Crypto Liquidation and its Impact on the Market

Crypto liquidation refers to selling off a cryptocurrency asset quickly to convert it into cash or another asset. The impact of crypto liquidation can vary depending on the context, the market conditions, and the reasons behind the liquidation. Here are some potential impacts:

Price Volatility: Large-scale liquidation of a particular cryptocurrency can lead to rapid price fluctuations. Selling a significant amount of cryptocurrency quickly can drive the price down due to increased supply, potentially causing panic selling by other investors.

Market Sentiment: A sudden wave of liquidations can affect market sentiment, creating fear and uncertainty among investors. This negative sentiment can contribute to further price drops and increased selling pressure.

Market Depth: Liquidation of a significant amount of cryptocurrency can deplete the market depth, making it harder for buyers to absorb the supply. This can exacerbate price drops and lead to increased volatility.

Cascading Liquidations: If the price of a cryptocurrency drops quickly, it can trigger automatic liquidations for leveraged positions. This can result in a cascade of liquidations, driving the price down even further and creating a selling cycle.

Investor Losses: If investors are forced to liquidate their holdings during a market downturn, they may incur losses if the selling price is lower than their purchase price. This can lead to financial losses for individuals and institutions.