Bitcoin (BTC) Price Correction Triggers Market-Wide Selloff and Record Liquidations

TLDR

• Bitcoin crashed to $94,249, triggering a market-wide selloff that erased $1.5 billion in crypto derivatives
• Over 514,384 traders were affected, with long positions accounting for $1.38 billion in liquidations
• The crash occurred shortly after Bitcoin reached an all-time high of $103,679 on December 4th
• Ethereum fell 8% below $3,800, while other altcoins saw double-digit percentage losses
• Bitcoin has since recovered to around $97,800, but market sentiment remains cautious

The cryptocurrency market experienced a steep decline on Monday as Bitcoin plunged below $95,000, leading to a cascade of liquidations worth $1.5 billion across the crypto derivatives market.

Bitcoin’s price, which had been hovering around $97,748, suddenly dropped to $94,249 in a matter of minutes. The sharp movement caught many traders off guard, resulting in the liquidation of positions held by more than 514,384 traders, according to data from Coinglass.com.

Long positions bore the brunt of the damage, with $1.38 billion worth of bullish bets being wiped out. Short positions accounted for a relatively smaller portion of the liquidations at $136.7 million, highlighting the market’s overall bullish positioning before the crash.

The downturn came less than a week after Bitcoin reached its all-time high of $103,679 on December 4th. The premier cryptocurrency had enjoyed a strong rally following Donald Trump’s election as the 47th President of the United States, breaking through the $100,000 barrier for the first time in its history.

Ethereum, the second-largest cryptocurrency by market capitalization, suffered even heavier losses than Bitcoin in percentage terms. The price of ETH fell 8%, dropping below $3,800. Liquidations in Ethereum positions reached $204.7 million, exceeding Bitcoin’s liquidation figure of $163.4 million.

Other major cryptocurrencies saw even steeper declines. XRP dropped by 11%, while Dogecoin fell by 10%. Cardano holders watched their positions decline by 13%. The widespread selling pressure affected virtually all digital assets in the market.

Some of the hardest-hit tokens included PNUT and DYDX, which saw their values decline by 22% and 21% respectively. GALA token holders experienced a 20% reduction in their holdings’ value during the day’s trading session.

The total cryptocurrency market capitalization shrank by 7.5% in just 24 hours, underlining the intensity of the selling pressure. This decline follows a previous liquidation event on December 5th, when $1.1 billion in leveraged positions were eliminated – the largest such event since December 2021.

Several factors may have contributed to the market downturn. Traders noted unusual Bitcoin transfers originating from Bhutan, though the exact impact of these movements remains unclear. Additionally, Google’s announcement of its ‘Willow’ quantum computing chip sparked discussions about blockchain security, despite experts maintaining that quantum computing poses no immediate threat to cryptocurrency networks.

By 4:45 p.m. EDT on December 9th, Bitcoin had recovered some ground, trading at $97,294. However, the price continued to show volatility, struggling to maintain the $97,000 level in subsequent trading.

Bitcoin Price on CoinGecko

The altcoin market showed particular weakness during the correction. The ‘Altcoin Season Index’ (ASI) dropped below the crucial 75 threshold to 69, indicating an end to the recent period of altcoin outperformance.

Monday’s market action demonstrated the inherent risks of trading with leverage in cryptocurrency markets. The swift price movements led to a domino effect of liquidations, as automated trading systems were forced to close positions to meet margin requirements.

The derivatives market played a central role in amplifying the price movement. As positions were forcibly closed, the selling pressure increased, leading to further price declines and additional liquidations.

Trading volumes surged during the correction, with exchanges reporting heavy activity as traders rushed to adjust their positions. The increased volume highlighted the market’s ability to absorb large sells, though not without substantial price impact.

Market data shows that some traders have begun to reduce their leverage exposure following the liquidation event. However, overall market positioning remains bullish, suggesting many participants view the correction as temporary.

Bitcoin’s price has since stabilized around $97,800, though traders remain cautious about potential further volatility. The cryptocurrency market’s total daily trading volume exceeded $200 billion during the height of the correction.