As the price of Bitcoin fell below $22,000 on Friday, data from crypto analytics company Glassnode indicates that long liquidations of Bitcoin futures gained a record eight-month high.
After a protracted bullish run over the previous month, the crypto market experienced a significant decline on Friday, which caused major cryptocurrencies to lose crucial support and drop to new monthly lows.
Last week, Bitcoin (BTC), which was trying to surpass the $25,000 resistance mark, dropped under $22,000, setting a new two-week low of $21,747. The second-largest cryptocurrency, Ether (ETH), had risen beyond $2,000 in the run-up to the Merge but has since fallen by 6% to a new weekly low of $1,726.
After several weeks of bullish momentum, the flash crash resulted in the liquidation of 157,098 traders, for total liquidation of nearly $551 million. According to data from Coinglass, traders of Bitcoin lost nearly $203 million, followed by those of Ether at $140 million.
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The accompanying chart demonstrates that there are far more liquidated long holdings than short positions, indicating that market sentiment was overwhelmingly positive before the flash crash. Compared to $398 million in long bets, only $41 million worth of short positions were liquidated.
On OKX, BTC futures long liquidations surpassed the previous record of $48,630,183.66 to reach an eight-month high of $84,934,697.05.
The rapid decline in the cryptocurrency market is being blamed on the anticipated interest rate increase by the US Federal Reserve in September. Data for the August consumer price index were lower than anticipated, which sparked a bullish spike in both the cryptocurrency and foreign exchange markets.
James Bullard, president of the Federal Reserve Bank of St. Louis, stated that he would support a 75 basis point rise. The Fed raising interest rates next month might trigger another downturn. After an initial price boom, a comparable interest rate increase of 75 basis points in June caused chaos in the cryptocurrency market.