On October 10, the crypto market experienced record liquidations of more than $19.000 billion following the escalation of trade tensions between the US and China.
Cryptocurrencies experienced one of their most tense days last week. In a matter of hours, more than $19.160 billion in leveraged positions were liquidated, nearly doubling the most severe episodes recorded in 2021. The magnitude of the correction surprised even the most experienced analysts and highlighted the impact that highly leveraged institutional flows and overly tight derivatives positions can have on cryptoassets.
The spark that ignited the cryptocurrency market correction came from the macroeconomic front. According to reports from Bloomberg and Reuters, escalation of trade tensions between the United States and China This triggered an immediate increase in global risk aversion. Stock markets reacted with declines, and the crypto sector, historically sensitive to external shocks, was no exception. Bitcoin and Ethereum fell sharply, dragging down thousands of futures and perpetual swap contracts that began to liquidate in a cascade.
Create your account and enter the crypto world with confidence.More than $19.000 billion in settlements on October 10
The way leveraged contracts work explains why a macroeconomic event can turn into a perfect storm for the crypto market. When an asset's price falls, the margin calls for leveraged positions are reduced. If the available capital isn't enough to cover the losses, the platforms automatically liquidate the positions to protect themselves. forced closure This implies additional sales in the market, which puts further pressure on prices and triggers further liquidations.
On October 10, this vicious cycle was activated with an intensity rarely seen before. In a matter of hours, liquidations exceeded $19.000 billion, a figure that, according to CoinGlass data, almost doubled the largest episodes of 2021.
According to experts, the magnitude of last week's price correction reflected not only the sector's sensitivity to macroeconomic factors, but also the level of exposure of traders, who had accumulated long positions with high leverage and were forced to close trades en masse, turning the correction into a temporary liquidity collapse.
Source: coinglass
For experts, the recent abrupt drop in the crypto markets was not an unexpected collapse, but a necessary correction that shook a system saturated with leverage. In just minutes, key cryptocurrencies like Bitcoin recorded losses of up to 8%, and several assets fell more than 50%, triggering on-chain liquidations that erased billions in value.
These same market analysis experts explain This phenomenon occurred because accumulated leverage generated latent risk. The spark that triggered the wave was the escalation of trade tensions between the United States and China, along with uncertainty about the Federal Reserve's interest rate decisions. These external variables disrupted the market's technical equilibrium, causing many leveraged positions to be automatically liquidated in a cascade.
Access crypto: buy and manage easily on Bit2MeThe market recovers after the fall, but uncertainty persists
After several days of volatility, the crypto market began to show signs of recovery. At the time of writing, Bitcoin trades above $116.000 again, recovering some of the ground lost during last week's massive liquidation, when it fell below $110.000 per unit. Ethereum also managed to surpass $4.200, a level that technical analysts currently consider key to projecting a new high in the short term.
Source: Coingecko
The stabilization of the market's major cryptocurrencies suggests that the major margin stressors have dissipated and that traders have recalibrated their exposure. However, the structural lesson remains. The crypto rally in the current cycle depends largely on institutional flows operating with high leverage. Therefore, when the macroeconomic environment becomes more difficult, these same flows can become a factor of instability, accelerating declines and generating episodes of massive liquidation.
Analysts at platforms such as Kaiko and Glassnode have warned that the concentration of positions at specific technical levels increases the market's vulnerability. If an external event pushes prices below those levels, the chain of liquidations could repeat itself. In this regard, the evolution of trade policy between the United States and China, as well as the Federal Reserve's interest rate decisions, will continue to be critical variables for the sector's performance and growth.
Trade with confidence and simplify your crypto experience hereIn short, the October 10 episode also reignited the debate about the need for greater transparency in crypto derivatives markets. Some experts point out that the lack of consolidated data on net exposure and leverage levels makes it difficult to anticipate the magnitude of risks. Others point to the need for more robust risk management mechanisms on platforms to cushion the effects of cascading liquidations.
Despite the uncertainty, what is clear is that, more than a crisis, what we experienced was a lesson in the dangers of excessive leverage. Although painful, this process cleanses up excesses and restores market balance. It reminds us that true strength is demonstrated through patience, discipline, and prudent risk management, because in finance, volatility can be punishing quickly, but true value is revealed over time.
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