The crypto market witnessed a significant event with the liquidation of long positions totaling over $970 million, resulting in a sharp drop in prices of major cryptocurrencies. Despite the visible negative effects, there are indicators that suggest a market rebound may be forthcoming.
Scale of Liquidations and Its Consequences
The total crypto market capitalization dropped from $4.35 trillion to $4.11 trillion, marking a decline of over $240 billion. This figure represents the largest intraday drop since the last significant correction earlier this year.
Main Liquidations on Long Positions
Despite nearly $1 billion in long trades being wiped out, the market did not fully crash. Capitalization remained above the key $4 trillion mark. Bitcoin briefly dipped below $122,000 but quickly bounced back above that mark. This suggests that what happened was more of a shakeout of over-leveraged traders rather than a complete collapse.
Positive Signals in the Market
Even with price drops, one key indicator that buyers may be preparing to jump back in is the rise in stablecoin reserves. An increase in USDC reserves on exchanges indicates that traders are preparing to potentially buy the dip. Additionally, high-volume wallets have increased their activity during this dip, suggesting institutional interest.
While a $970 million liquidation and a $240 billion market cap drop may sound alarming, the market's behavior following the incident indicates a potential for recovery. Increased stablecoin reserves and buying activity from large wallets create favorable conditions for future purchasing.
