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A harsh reality check for bullish crypto traders as the market experienced its second-biggest liquidation event this month. Following Bitcoin’s drop, the total crypto market saw liquidations soar to $261 million, with long bets accounting for the lion’s share at over $203.5 million, according to CoinGlass. This liquidation spree comes hot on the heels of the record-breaking $450.8 million in liquidations on October 1, when Bitcoin dropped by around 5%.
Long Bets Take A Hit
Optimism was high among traders as Bitcoin flirted with the $70,000 mark on October 21, its highest level in three months. However, the bullish sentiment quickly turned sour when Bitcoin’s price slipped to $65,500 on October 23, before making a slight recovery to $67,386. Over $58 million in Bitcoin call options were liquidated in just 24 hours, reflecting the vulnerability of leveraged positions in the volatile crypto market.
The fallout wasn’t limited to Bitcoin. Ethereum (ETH) long bets saw their largest liquidation day in October, with over $77 million wiped out as ETH’s price declined 1.7% to $2,552. Like Bitcoin, Ethereum had been riding a wave of optimism after reaching a two-month high of $2,750 just two days prior.
High Fees, Low Demand for Ethereum
Ethereum’s pullback highlights a deeper issue in the network: high transaction fees. On-chain data reveals that these elevated fees are disincentivizing activity on the Ethereum blockchain, which in turn has dampened demand for ETH staking. This trend is likely contributing to the decline in investor confidence, as the network’s usability issues come to the forefront, making it harder for ETH to maintain upward momentum.
Institutional Investors Hold Steady
Despite the volatility, institutional interest in Bitcoin remains strong. U.S.-based spot Bitcoin exchange-traded funds (ETFs) recorded a net inflow of $198.5 million on October 23. BlackRock’s iShares Bitcoin Trust ETF was the top performer, drawing in $323.6 million in inflows, although this was tempered by $99 million in outflows from the ARK 21Shares Bitcoin ETF and $25.2 million from the Bitwise Bitcoin ETF.
While the U.S. Bitcoin ETFs had enjoyed a streak of inflows between October 11 and 21, which brought nearly $2.7 billion into the funds, the market took a slight hit with an $87.9 million net outflow on October 22. Still, the continuation of strong inflows on October 23 shows that institutional investors remain bullish on Bitcoin’s long-term prospects, even in the face of short-term turbulence.
The crypto market’s rollercoaster ride this month underscores the fragility of leveraged positions, especially as Bitcoin and Ethereum approach key resistance levels. With Ethereum facing scalability challenges and Bitcoin recovering from its latest dip, the coming days will be crucial in determining whether the market can regain its upward momentum.
For now, the liquidations serve as a reminder that while optimism can fuel rallies, caution remains paramount in such a volatile space. As institutional interest continues to grow, the next big move in the market could be shaped by broader macroeconomic factors and evolving regulatory landscapes.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
