Understanding the Recent Crypto Market Liquidation Shock

On June 11, the value of Bitcoin dropped by 2.5% to $66,018 from its previous level of $69,547, whereas Ethereum witnessed a 2.58% decline to $3,500. This decline had a significant effect on the futures market, resulting in liquidations totaling about $200 million.

Significant Liquidations in the Market

Data from CoinGlass reveals that within the last 24 hours, 83,912 traders faced liquidations amounting to $190.97 million. The largest liquidation order was recorded on OKX with an ETH/USDT swap valued at $5.21 million. Liquidation occurs when investors fail to meet their margin requirements, leading to the exchange closing leveraged positions, potentially causing full or partial loss of the initial margin.

Bitcoin traders experienced the most substantial losses, with $46.9 million in liquidations, including $36.8 million from long positions and $14.07 million from short positions. Ethereum traders were next, facing liquidations totaling $41.0 million, composed of $31.3 million from long positions and $9.68 million from short trades.

These liquidations followed closely after the market saw $400 million in liquidations on June 7. The recent market correction resulting from futures market liquidations is linked to the expected May Consumer Price Index (CPI) report and the Federal Open Market Committee (FOMC) release on June 12.

Market Projections

Historically, the release of CPI data and FOMC rate decisions has triggered fluctuations in the cryptocurrency market as investors reassess risks. Currently, the 30-day correlation between the crypto market and US stocks is at its highest level since 2022. Typically, when CPI rises, Bitcoin and other crypto assets tend to experience price drops due to reduced disposable income among investors.

Insights for Investors

• Stay informed about the upcoming CPI and FOMC announcements to anticipate market fluctuations.
• Understand that higher CPI can lead to reduced investments in crypto assets due to lower disposable income.
• Recognize the strong correlation between crypto market trends and US stock market movements as a signal for possible market changes.
• Be prepared for sudden shifts in market conditions following significant economic data releases.

Reports suggest that the FOMC is expected to maintain the benchmark lending rate between 5.25% and 5.50%, while CPI data is predicted to range from 0.1% to 0.3%.

This summary provides an overview of the recent crypto market liquidation shock, outlining its effects on traders, market expectations, and advice for investors in light of forthcoming economic data reports.