Bitcoin and Ethereum Face Significant Decline - $647 Million in Long Positions Liquidated Overnight

Bitcoin [BTC] and Ethereum [ETH] experienced a shocking decline overnight, leaving many in the market surprised. What caused this downturn? Is it indicative of a larger trend? Here’s an overview of the situation.

Key Takeaways:

Bitcoin and Ethereum experienced significant drops, with $647 million in liquidations occurring overnight.
Long positions suffered the most, particularly in Bitcoin and Ethereum.
ETF data shows declining demand and negative cash flows leading into the price drop.
Whale activity suggests considerable movement from large holders, often linked with market volatility.
Understanding these market dynamics is crucial for traders and investors navigating the crypto landscape.

Bitcoin and Ethereum Face Significant Decline - $647 Million in Long Positions Liquidated Overnight

Sudden Drop Instead of Expected Gains

Bitcoin and Ethereum
Source: TradingView

Both Bitcoin and Ethereum began December with consecutive hourly declines. Bitcoin plummeted from around $86,300 to nearly $85,000 within just one hour, continuing its downward trend towards $85,800. This sequence showcases a clear shift from a steady consolidation phase to an unexpected sell-off, without any effective recovery attempts in subsequent hours.

Ethereum Decline
Source: TradingView

Ethereum displayed a similar pattern, dropping from about $2,825 to slightly over $2,806 during the first major decline. Following this, it further decreased toward $2,820 before continuing to fall. The trends on both charts indicate a market-wide sell-off that impacted these major cryptocurrencies simultaneously, quickly erasing hours of price stabilization.

Understanding the Impact of Liquidations

Recent liquidation data highlights the extent of the damage caused by this decline. In the past 24 hours, traders faced a staggering $647.25 million in liquidations, with long positions suffering the most, amounting to $572.91 million. Specifically, Bitcoin alone accounted for $201.89 million in liquidated positions, while Ethereum contributed $159.20 million.

Liquidation Data
Source: CoinGlass

Other cryptocurrencies were affected as well, with the "Others" category logging $73.86 million in liquidations, Solana [SOL] experiencing $35.09 million, and Ripple [XRP] facing about $15.67 million. The largest single liquidation involved an ETH/USDC position valued at $14.48 million. The data indicates that over a 12-hour period, around $571.90 million was wiped out, primarily from long positions.

Increased Sell-Side Pressure Observed

Sell-Side Pressure
Source: SoSoValue

Analysis of Exchange-Traded Fund (ETF) data shows a notable decrease in demand prior to the drop. Bitcoin spot ETFs reported only $71.37 million in net inflows, following several consecutive days of significant outflows that reached as deep as -$1.1 billion.

Ethereum ETF Weakness
Source: SoSoValue

Similarly, Ethereum ETFs reflected weakness with prolonged periods of negative daily inflows, leading to a decrease in assets to around $19.15 billion.

Whale Activity
Source: Santiment

Whale activity has surged for both Bitcoin and Ethereum, marked by frequent spikes in transactions exceeding $1 million. The movement of funds by large holders is often followed by heightened market volatility.

Exchange Net Flow
Source: CryptoQuant

Additionally, Bitcoin’s exchange net flow chart indicates an influx of coins, including a significant spike approaching -350K BTC, coinciding with price weakness around the $86,000 mark.

Conclusion

The sudden declines of Bitcoin and Ethereum remind investors of the volatility inherent in the cryptocurrency market. As traders navigate through these fluctuations, understanding the underlying factors becomes essential for strategic decision-making.