Cryptocurrency decline leads to $20 billion Bitcoin liquidation

1、 The rapid price drop combined with concentrated liquidation has caused a "double impact" on the cryptocurrency market

The core trigger of this round of turbulence is the linkage effect of global risk aversion and collective selling of risk assets. According to CoinGlass data cited by Reuters, as risky assets such as global stocks and precious metals are being sold off on a large scale, the price of Bitcoin has plummeted significantly. The cumulative amount of forced liquidation by related investors in recent times has reached 2.56 billion US dollars (about 19.97 billion Hong Kong dollars), which intuitively reflects the severity of market deleveraging. ​

Specifically, the price of Bitcoin has accelerated its decline, with a single day drop of over 6% last Saturday. The latest transaction price has fallen to around $78396, a significant decrease from its previous high. Mainstream cryptocurrencies such as Ethereum and Solana have experienced simultaneous declines, leading to a temporary decrease in market value and spreading panic. ​

This round of liquidation mainly focused on Bitcoin leveraged contracts, with a high proportion of multiple liquidation orders, reflecting the previous market's overly optimistic expectations of price rebound. Investors blindly increased leverage and ultimately encountered liquidation. Data shows that in recent times, over 400000 cryptocurrency positions have been liquidated online, with over 60% of Bitcoin related positions being liquidated, confirming its strong transmission effect on the entire market. ​

2、 The core causes of volatility amplification: thin liquidity and increased market sensitivity

Bitfinex analysts interpret that the thin market liquidity on weekends is the key to amplifying price fluctuations. On weekends, the participation in trading decreased and transactions shrank. A small amount of large selling triggered severe price fluctuations, which in turn triggered the leverage liquidation line, forming a chain reaction of "selling price drop closing" and expanding the size of liquidation. ​

The more fundamental change is that cryptocurrencies have become particularly sensitive to safe haven sentiment. Bitcoin, which was once endowed with the "digital gold" safe haven attribute, did not retain its value in this round, but instead fell in sync with risky assets, becoming the preferred choice for investors to cash out. ​

Market observers point out that this increase in sensitivity is closely related to macro uncertainty and excessive market leverage. The interweaving of global macro risks has lowered investors' risk appetite, causing funds to withdraw from high volatility assets; In the early stage of market rebound, a large number of investors increased their leverage to chase after the rise. The high leverage made it easy for a slight price correction to trigger programmed liquidation, triggering a chain reaction of liquidation. ​

3、 The pressure of deleveraging is highlighted, and it will take time for the cryptocurrency market to return to rationality

The concentrated liquidation of $2.56 billion in this round is an inevitable result of deleveraging in the cryptocurrency market, and also reflects the strong speculative nature of the market. Despite the expansion of the cryptocurrency market and the increase in institutional participation, the proliferation of leveraged trading has always accumulated huge risks. This liquidation is a spontaneous process of deleveraging and releasing risks in the market. ​

This round of correction and deleveraging is also in line with the overall adjustment trend of global risk assets. Recently, the US stock market, technology stock market, and precious metal market have all experienced severe fluctuations, with cryptocurrency being more affected by high speculation; At the same time, Bitcoin ETFs continue to experience net outflows of funds, and institutional withdrawals further weaken market support. ​

Industry insiders believe that there is still pressure to deleverage in the market in the short term, and price fluctuations will continue. With the occurrence of liquidation, the level of leverage decreases, speculative funds withdraw, and the market is expected to return to rationality, but it still takes time. The optimistic view is that the participation of Bitcoin institutions has increased, liquidity has improved, and long-term resilience has been enhanced. ​

For investors, this liquidation is a profound warning: the high volatility and high risk attributes of cryptocurrencies remain unchanged, and leveraged trading will amplify losses. In the current market environment, investors should remain rational, participate in trading cautiously, stay away from high leverage, recognize its speculative nature, and avoid blindly chasing gains and selling losses. ​