Cryptocurrency traders who were betting on increasing pricing just lost everything. As Ethereum plummeted 20% in a day and Bitcoin dropped to $91K, the market saw over $2.2B in liquidations.
When a significant crypto fall was caused by hysteria over Trump's recently announced tariffs on Canada, Mexico, and China, traders who had placed large bets on prices rising had their positions brutally liquidated. The mayhem resulted in the worst single-day liquidation event ever documented, surpassing even the collapse of FTX and Terra (LUNA).
Futures traders took the brunt of this storm, according to CoinGlass, with $345 million in short positions liquidated as of February 3 compared to $1.87 billion in long holdings.
Ethereum (eth-17.12%) Ethereum
With $600 million in ETH liquidations, Ethereum suffered the most, while Bitcoin (btc -4.08%) suffered the least.
With $400 million, Bitcoin came next.
The price declines were equally severe: Bitcoin fell to $91,200 before rising back to $93,600, still losing 6.5% in a single day, while Ethereum plummeted to $2,500, down 20% in a single day.
The panic was exacerbated by the even more severe impact on altcoins, with the majority of the top 100 experiencing 15% to 30% drops in a single day.
Due to the system's extreme leverage, liquidations quickly intensified the slide once prices began to drop. The market was unable to quickly withstand the selling pressure since it was already brittle due to previous volatility.
An analyst has referred to this as the greatest altcoin drop since the COVID-19 pandemic and cautioned against attempting to "revenge trade" using leverage, highlighting the need for patience rather than impulsive wagers at this time.
The harm is done for now. Whether this was a brief shakeout or the beginning of something more significant will be revealed over the course of the coming days.