Morning Crypto Report: Major Setbacks in the Crypto Market

On January 20, the crypto market faced significant losses amid broader economic concerns. Following escalating tariff disputes and impending macroeconomic challenges, major indices took a hit, with the Nasdaq falling by 1.6% and the Dow Jones dropping nearly 700 points. Meanwhile, gold prices surged to a record high of over $4,700.

Key Takeaways

A prominent XRP long position faced a substantial loss, accounting for a significant portion of the daily drawdown in Hyperliquid trading.
Bitcoin experienced a temporary drop to $0 on a decentralized exchange due to a data error, affecting numerous positions.
Shiba Inu (SHIB) saw an extraordinary liquidation event, with a long position facing a staggering 5,407,865% imbalance compared to shorts.
Overall market sentiment remains cautious, with a declining Fear & Greed Index and increased interest in put options for Bitcoin.

Major Losses for XRP Traders

In a dramatic turn of events within the crypto trading sphere, one of the largest XRP positions on Hyperliquid collapsed. This particular wallet had invested an astounding $74,951,852.27 for 38,829,121.00 XRP at a leverage of 10x, entry point set at $2.292. Unfortunately, this timing proved disastrous as the XRP value plummeted.

Currently, XRP is trading at $1.9303, leading to an unrealized loss of $14,060,551.57, equating to a staggering -187.59%. The liquidation threshold for this position is set at $1.2694, rapidly approaching as the market continues to decline. The trader is already dealing with $1,425,965.10 in funding costs, backed by collateral amounting to $7,495,185.23. Given the current trends, the situation looks dire.

XRP Trading Source: Hyperdash

This loss represents nearly 73% of the total daily drawdown of Hyperliquid, which reached -$19.2 million across all long positions. The second-largest loss originated from Ethereum (ETH), with a drop of $4.81 million while maintained at 15x leverage.

For XRP, the market appears to be in a downward volatility compression phase, where support is identified at $1.66 and critical resistance sits at $2.05. If the 20-day EMA struggles to hold at $1.89, the bullish trend may be invalidated.

Bitcoin's Temporary Glitch

On January 19, a malfunction on the decentralized futures platform Paradex caused Bitcoin to erroneously display a price of $0. While Paradex staff quickly worked to resolve the issue, halting some services and restoring normal operations within seven hours, many users experienced negative consequences.

Positions executed during this crash, particularly those utilizing perpetual orders, were executed according to protocol, resulting in final losses for clients. Although a rollback snapshot was attempted, it only safeguarded spot states and not leveraged contracts, which left many traders vulnerable. At its peak, trading volume reached $2.8 billion on Paradex, and by January 20, open interest increased, signaling either user anticipation of compensation from the platform or a disregard for risks.

Despite this chaos, Bitcoin's price remained steady around $90,800 to $91,300 on centralized exchanges.

Shiba Inu's Astonishing Liquidation Spike

The Shiba Inu (SHIB) futures market witnessed a staggering liquidation ratio, with $48,126.83 liquidated on the long side against a mere $0.89 for shorts, according to CoinGlass data. This extraordinary 5,407,865% imbalance occurred over four hours as SHIB fell below a critical support level at $0.000008.

The price drop breached a previous support level at $0.00000786, triggering liquidations across margin trades. SHIB's daily chart indicates a consistent decline since it was rejected at the $0.0000090 level, with the next noteworthy support at $0.00000699, which could lead to an accumulation of limit orders.

SHIB Liquidation Data Source: CoinGlass

The extreme imbalance of long-side liquidations with minimal short participation underscores the risks within SHIB’s derivatives market. Most participants remain net long, creating a precarious situation if prices dip further.

Overall, while the total value of liquidations remains relatively small, the exceptional ratio is among the highest recorded for a top 30 cryptocurrency.

Current Market Sentiment

The overall outlook for the cryptocurrency market remains negative. On Deribit, popular options are pivoting around Bitcoin put options between $75,000 and $80,000. Bitcoin is still hovering above $91,000, but bearish pressures are mounting. The Fear & Greed Index has dropped by 12 points to 32, marking the lowest level since mid-October.

On-chain data reveals that holders have been selling at a loss consistently over the past 30 days, a trend not observed since the fourth quarter of 2023. Nevertheless, institutions and wealthy investors seem to be capitalizing on this weakness, with more than 577,000 BTC added over the past year, valued at approximately $53 billion.

Key levels to monitor:

The risk across the crypto landscape remains asymmetrical. Gold is currently viewed as a macro hedge, while Bitcoin is striving for narrative support, and altcoins face significant challenges.