The cryptocurrency market experienced significant turmoil in the past 24 hours, with major digital assets plummeting by as much as 20%. This sudden downward movement was triggered by activities related to a wallet associated with the infamous Mt. Gox exchange, causing unease among traders, resulting in an average market decline of 10%.
Bitcoin (BTC) was among the hardest hit, dropping 8% and briefly dipping below $54,000 before a partial recovery. This decline erased all the gains made since February. Other major cryptocurrencies such as Ether (ETH), Solana (SOL), Cardano (ADA), and Dogecoin (DOGE) also suffered losses, with ETH falling over 10% and DOGE plummeting nearly 18%.
According to data from Coinalyze, the market turmoil led to liquidations totaling over $580 million, primarily linked to long positions betting on higher prices. This event marked one of the largest liquidation events of the year, with bullish positions on BTC and ETH alone accounting for losses exceeding $300 million.
The largest single liquidation order, valued at $18.4 million, occurred on the Binance exchange, predominantly involving ETH trades. Concurrently, open interest in futures contracts dropped by 12%, suggesting a significant outflow of funds from the market.
Liquidations are triggered when traders fail to meet margin requirements for leveraged positions, leading to the automatic closure of their trades due to insufficient funds. In the recent market turmoil, these liquidations were exacerbated by movements from the Mt. Gox exchange, which transferred a substantial amount of BTC to a new wallet.
Mt. Gox, which was a major cryptocurrency exchange that collapsed in 2014 following a significant hack, is now in the process of preparing to distribute recovered assets to its creditors. The impending repayments in Bitcoin and Bitcoin Cash from Mt. Gox could potentially introduce selling pressure to these markets as creditors liquidate their holdings.
Market analysts, such as trading firm QCP Capital, have expressed caution about the cryptocurrency market’s outlook in the coming months. They anticipate a subdued third quarter for Bitcoin due to uncertainties surrounding the potential impact of the Mt. Gox asset redistribution on the market.