The relatively neutral week on the cryptocurrency market did not end well for its participants, with the largest coin losing a quarter of its value. Bitcoin has dropped to $47,000, and Ethereum is now trading below $4,000.
Bitcoin's one of the strongest plunges in a year
While the largest cryptocurrency on the market has already shown rapid and volatile movements previously in the year, the most recent drop was the third strongest overnight dip in 2021.
Bitcoin has been trading at the local bottom of $42,000 and even going lower on exchanges that have failed to provide enough liquidity for their users. Traders on the cryptocurrency exchange Huobi Global were able to fill orders at approximately $28,000.
The reason behind the strong drop was the widely discussed overheat of the market, which remains highly leveraged even after the most recent 15% correction. Due to a large number of open long and short positions with high leverage, increased volatility swiped most positions on the market in a matter of hours.
Ethereum drops below $4,000
With the majority of the market dropping below critical numbers, Ethereum follows the general trend and breaches a strong prior support. It is now trading at approximately $3,900.
The strong plunge in asset value was also caused by high open interest on both futures and options contracts, which usually act as a reflection of the current volatility of the market. Once selling pressure has appeared on the scene, a cascade of liquidations causes an asset's price to drop down significantly.
Liquidations reach $1.8 billion
With the majority of leveraged positions on the market closed, the value of liquidated positions almost reaches $2 billion. The value includes liquidation data from various centralized derivatives exchanges and numerous trading pairs.
The highest liquidation volume providers are Binance and OKEx, with $706 and $659 million, respectively.