Bears Take Control As Crypto Market Liquidates $580 Million – What’s Next?

Major crypto assets have recorded significant declines over the past 24 hours, resulting in a staggering $580 million in liquidations.

The sharp downturn became evident during early Asian trading hours, primarily due to movements from a wallet associated with the defunct exchange Mt. Gox. This movement posed fear of potential sell pressure to market participants, sending prices downward by 10% on average.

Crypto Market Faces Bearish Pressure

Bitcoin recorded a notable drop of 8%, briefly dipping below the $54,000 mark, effectively wiping out all gains since February before slightly recovering.

Similarly, Ether (ETH) suffered an even steeper drop of over 10%, while Cardano's ADA and Solana's SOL plunged by approximately 8%. Dogecoin (DOGE) took the heaviest hit, dipping almost 18%.

The rapid price declines led to over $580 million in liquidations of long positions (trades betting on higher prices), one of the largest liquidation episodes in 2024.

Bullish bets on Bitcoin and Ether accounted for over $380 million in losses. The largest single liquidation order, valued at $18.4 million in ETH, occurred on the Binance exchange.

Meanwhile, open interest, which reflects the total number of active futures contracts, decreased by 12%. This observation suggests that a significant amount of capital exited the market.

In most cases, traders consider liquidations a response to fear of losing an initial margin. Such events happen when a crypto exchange forcefully ends a trader's leveraged position, considering the initial margin has been exhausted.

Liquidations also occur when the chances of a trader fulfilling the margin requirements needed to sustain their leveraged position are slim. In such an event, the exchange closes all trades to prevent further losses.

Mt. Gox Movements and Market Fears

Large amounts of Bitcoin were moved from a crypto wallet connected to Mt. Gox, worsening the market turmoil. This activity surfaced as the exchange prepared to repay its creditors this month.

BREAKING

Mt Gox moves 47,228 BTC ($2.71 billion dollars) from cold storage to a new wallet. pic.twitter.com/3ZdSlC1IX2

- Arkham (@ArkhamIntel) July 5, 2024

Mt. Gox, which collapsed after a major hack in 2014, is set to start distributing recovered assets this month after several delays.

Many fear that these repayments, which consist of Bitcoin and Bitcoin Cash, could pose selling pressure on the markets. Somehow, it has contributed to the current uncertainty and price volatility.

Meanwhile, trading firm QCP Capital expressed a cautious outlook, predicting a lackluster performance for Bitcoin in the coming months.

As reported by Iko Web3, the firm stated in a Thursday broadcast on Telegram that Q3 2024 could be a period of uncertainty for Bitcoin. It hinged this prediction on the supply release from the defunct exchange Mt. Gox.

This sentiment reflects the broader market's concern over the potential influx of Mt. Gox-related assets and its impact on prices. In the meantime, the overall crypto market holds a market cap of $1.97 trillion, which indicates a 7.66% dip over the past 24 hours.

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