Total liquidation hits $1.2 billion as Bitcoin trades below $27,000

Bitcoin has fallen below a critical $30,000 support zone, and with it, over 428,000 traders have lost a total of $1.22 billion in the last 24 hours as margin calls and loss of funds have become the order of the day. Many have compared the decline in the market to what was seen in the 2008 market crash while others have likened this selloff to the famous episode, ‘the red wedding’ of the popular TV series, Game of Thrones.

The entire cryptocurrency market capitalization has fallen approximately 20% as it currently stands at $1.16 trillion as of the time of this writing, with strong indications that the market will soon lose its trillion-dollar status.

As with bitcoin, so is every other altcoin posting declines of 40% and more in the last seven days as the sell-off deepens. A major focus has been the LUNA token, the native token of the Terra blockchain, trading as low as $0.28, after its native programmable stablecoin lost its peg, which currently trades $0.65 as of the time of this writing.

What you should know

Liquidation 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 is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open). Liquidation occurs in both margin and futures trading.

  • Longs accounted for $841.32 million or 68.81% of the total liquidations seen in the market, as of the time of this writing. The shorts accounted for the rest.
  • The blood bath seen in the market began when the U.S. Fed hiked its interest rate to 1%, the largest increase since 2000, as it handed down its policy decision last week Wednesday.
  • We are currently seeing the effects of the policy decision made by the federal reserve. The U.S. Fed increase of the interest rate brought about a strong dollar index (a measure of the strength of the U.S. dollar).
  • As of the time of this writing, the dollar index is trading at a 20-year high, currently above 104 basis points.
  • When Bitcoin sneezes, the altcoins catch a cold and this was exactly what played out yesterday. We saw a massive sell-off in the altcoin market, with many tokens losing 40% and more.
  • In fact, the selloff saw DOT and AVAX lose their top 10 status, as they have been overtaken by Binance’s stablecoin BUSD and Dogecoin. There are currently three stablecoins ranking among the top 10 by market cap.
  • Okex exchange accounted for the most liquidation, representing $393.98 million or 32.22% of the total liquidations. Binance came in second, accounting for $389.02 million which represents 31.82%.
  • Bitcoin liquidations accounted for the most as expected, representing $347.38 million or 28.51% of the total liquidations in the last 24 hours. Ether came in second, accounting for $344.37 million and in third place, LUNA, accounted for $125.82 million.

Many are attributing the crisis with LUNA and its programmable stablecoin UST to be the major factor causing the selloff in the market. This is because, before the selloff, the Luna Foundation Guard (LFG) bought $3 billion worth of Bitcoin to defend the UST peg.

They initially announced that they loaned off $1.5 billion in BTC to market makers to defend the peg but the wallet holding the 42,500 BTC has since been emptied, indicating that the LFG could be selling its BTC holdings and adding even more selling pressure to an already panicking market.

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