The crypto market suddenly turned red on March 10 in its worst selloff of the year. Bitcoin dropped below $20,000 for the first time in three months, and market sentiment is bearish. The aftermath of the crash left traders reeling in millions of dollars in active trading positions that were liquidated during the period.
Derivatives Traders Suffer Huge Losses
According to data from CoinGlass, derivatives traders have lost about $202 million in the past 24 hours. Leverage trading or the futures market is when traders speculate using derivatives or loans from exchanges.
In this type of market, traders can go long (speculate a rise in the coin) or short (speculate a dip in the price). When the price reaches a certain level that contradicts the trading position, the trade is canceled and the trader loses his capital.
CoinGlass data further shows that BTC has the largest liquidation volume of over $60 million, with Ethereum coming in second with $52 million. This is not surprising since the two tokens are the most traded in the crypto market.
Related reading: The Time to Sell Bitcoin (BTC) Is Now, says Peter Schiff
The liquidation number was the highest recorded since mid-January. On occasion, the bearish movement of the market saw more than $490 million liquidated in one day between different exchanges.
Factors Affecting Crypto Market Crashes
The sharp price drop affecting the crypto market has come after recent developments. Silvergate Crypto Bank has reported on March 9, 2023, that it will shut down its operations. This comes less than a week after Silvergate Capital Corporation indicated that it is evaluating whether to continue operating this year and close its crypto payment network.
The negative sentiment was followed by the news that New York Attorney General Letitia James has officially sued crypto exchange Kucoin. According to these settings, Kucoin offers, sells, and buys securities without registration. It also states that ETH, the original token of the Ethereum blockchain, is a security. According to James, ETH is included in the definition of securities because they represent the investment of money in public companies, with profits derived mainly from the efforts of others.
Related reading: Silvergate To Close Bank And Cease Operations
Prosecutors alleged that Kucoin, one of the oldest exchanges, engaged in the business of selling and offering to sell commodities through accounts, agreements, or contracts to New York accounts primarily for investment purposes.
Beyond just crypto, several external factors have affected the market with the new forecast from the US Federal Reserve. Jerome Powell, the chairman of the Fed, announced before the US Senate Banking Committee that the economic outlook was not as expected this quarter.
Inflation forecasts are expected to result in higher-than-expected interest rates during the next Fed meeting scheduled for March 22.
Bitcoin price
Bitcoin has recovered slightly from the decline and is currently trading for $20,126 at the time of writing.
Featured images from Unsplash, Charts from Coinglass.com and Tradingview.com