Bullish crypto traders were caught on the wrong footing and faced over $700 million in liquidations as contagion fears from FTX weighed on the markets. By shauryamalwa
Total crypto market capitalization slid to $900 billion from over $1 trillion on Wednesday morning as traders reacted to speculations around prominent exchange FTX’s liquidity issues. Over $700 million in long, or bets for higher prices, were liquidated in the past 24 hours as traders were caught on the wrong footing.
Bitcoin and ether declined more than 8% in the past 24 hours to reach levels previously seen in early October, putting a gradual recovery on hold. Other crypto majors like XRP, dogecoin and cardano slipped over 12%, while solana – of which Sam Bankman-Fried is a prominent backer – dropped 25%. Futures tracking bitcoin and ether saw a cumulative $390 million loss due to liquidations, while SOL futures saw $40 million liquidated. FTT futures had a relatively lesser $27 million in liquidations – implying the steep drop was mostly driven by sales of spot tokens.refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader cannot meet the margin requirements for a leveraged position .
The report sparked rumors of FTX becoming possibly insolvent, which in turn led to industry players selling FTX-linked coins to protect their own downside. Rival Binance, which held over $500 million of FTT on its books,– which culminated in a 24-hour-long drama that ended with Binance signing an intent to acquire FTX, which is now considered by many to be insolvent.
Such market dynamics spooked crypto markets as traders reacted to possible contagion risks. FTT prices slid 70% to reach levels previously seen in mid-2021.
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