The crypto market, known for its legendary volatility, has struck again. In the space of a few hours, Bitcoin and Ethereum, the two largest cryptocurrencies on the market, saw their prices plummet, leading to a wave of liquidations that exceeded $175 million.
Bitcoin's sharp drop despite healthy stock markets
Crypto investors witnessed an unusual scene on Thursday afternoon: As U.S. stock markets continued to rise, cryptocurrencies crashed.
In less than an hour, the price of Bitcoin dropped by almost 3%, reaching $57,787. Ethereum, on the other hand, was hit even harder, dropping to $2,547. Solana, Dogecoin and other major cryptocurrencies were not spared, recording even sharper declines.
This divergence between the performance of stock markets and cryptocurrencies is intriguing. While indices such as the Nasdaq Composite, the S&P 500 and the Dow Jones posted gains of 2.3%, 1.6% and 1.4% respectively, cryptos began to bleed.
This unexpected situation highlights how crypto markets can sometimes become disconnected from macroeconomic trends.
Liquidations in cascade
The price drop triggered an avalanche of liquidations. In the 24 hours following the event, total liquidations reached a staggering $176 million.
Long positions, betting on rising prices, are being re-opened in series, which further fuels the panic.
Ethereum was hit the hardest, with over $59 million liquidated, followed closely by Bitcoin with $50 million.
This liquidation The massive liquidation is partly due to the snowball effect of “cascading liquidations.” When prices fall rapidly, leveraged positions are automatically liquidated. This puts additional pressure on crypto prices, leading to further liquidations, and so on.
It's a vicious circle that can quickly turn a moderate correction into a full-blown flash crash.
Volatility for no apparent reason
Interestingly, this sudden drop does not seem to be linked to obvious macroeconomic factors. Indeed, the latest publication of the consumer price index (CPI) in the United States had rather reassured investors, with inflation falling to 2.9%, the lowest rate since 2021.
Moreover, the prospect of an aggressive interest rate cut by the US Federal Reserve starting in September should, in theory, have boosted markets, including cryptocurrencies.
So why the sudden drop? Some analysts point to the inherent fragility of crypto markets, where low liquidity and high order concentration can amplify price movements.
Others point to panic selling triggered by trading bots, exacerbating losses. Ultimately, the lack of a clear trigger leaves investors perplexed.
Maximize your Tremplin.io experience with our 'Read to Earn' program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
Join the Read to Earn program
