Crypto liquidations reach $516M as Bitcoin dips 7%
Bitcoin and other cryptocurrencies experienced a significant dip on Monday after a two-month rally. Bitcoin fell seven percent to trade at $40,758, wiping out $516 million worth of crypto futures contracts in one day.
The sudden dip is likely caused by large-scale selling by “whales,” which triggered panic among traders and resulted in the liquidation of long contracts. Evidence supporting the whale selling theory comes from the Coinbase Premium Gap (CPG), which plummeted to -250.
The CPG indicator reflects the difference between Bitcoin prices on Coinbase (USD) and Binance (USDT), suggesting which user group dominates the market. A positive CPG signifies more buying from U.S. investors, while a negative value indicates stronger buying pressure from global users.
The CPG’s sharp decline and the simultaneous drop in Binance’s reserves, where 16,000 BTC worth $671 million were sold within a week, strongly suggest whale intervention.
Since December began, traders have been cautious about taking high-leverage risks in the derivatives market, evidenced by the falling leverage ratio. Monday’s crash is expected to discourage large bets until January.
After the dip, the overall market capitalization of cryptocurrencies also experienced a six percent decline to $1.6 trillion. However, Bitcoin remains five percent higher than its monthly starting point at $38,688, while Ethereum sits seven percent above its opening price.
Other altcoins were not spared from the market correction. ORDI, which saw explosive growth last week to reach an all-time high, slumped 14 percent in the past day. Similarly, Pepecoin (PEPE) experienced a 13 percent drop.
However, some altcoins managed to buck the trend and even see gains. Institutional investors showed particular interest in Solana (SOL) and Avalanche (AVAX), as evidenced by $5 million worth of deposits into their exchange-traded products last week. Additionally, ImmutableX (IMX) saw a 10 percent gain.
Meanwhile, Binance USD (BUSD) briefly lost its dollar peg, dropping to $0.97 at one point. The instability is attributed to the automatic closure of BUSD margin trading and futures contracts.
BUSD has been on a downward slope since the SEC sued Paxos, the firm responsible for its minting and redemptions. Users can continue to redeem their BUSD tokens until February 2024, after which they will be converted to FDUSD, another stablecoin issued by FD121 Ltd.
Angel Marinov is the Managing Editor at Coinlabz. With extensive knowledge of crypto payments and blockchain use cases, Angel is a trusted source of accurate and timely information