In the past 24 hours, futures traders speculating on higher cryptocurrency prices have witnessed approximately $217 million in liquidations. The market downturn comes as the approval of spot Bitcoin (BTC) exchange-traded funds (ETFs) continues to generate a “sell-the-news” sentiment, with traders showing no signs of slowing down their contrarian bets.
Grayscale’s Bitcoin holdings and ETF shares’ impact
Concerns regarding cryptocurrency fund Grayscale’s potential sale of its Bitcoin holdings have played a role in the recent price drop. Grayscale, a major player in the cryptocurrency space, moved over $400 million worth of Bitcoin to custodian Coinbase Prime on Thursday. This move is considered a strategic preparation for a potential sale, contributing to the downward pressure on prices.
Verified wallets linked to Grayscale, identified by analysis firm Arkham, have been closely monitored. Additionally, GBTC (Grayscale Bitcoin Trust) shares experienced a 0.9% discount on Thursday, indicating a likelihood of selling pressure in the market.
However, it’s worth noting that as BlackRock’s IBIT surpassed $1 billion in assets under management (AUM) on Wednesday, other ETFs may be absorbing most of these sales, mitigating the overall impact on the market.
Bitcoin’s recent performance and its Ripple effect
Bitcoin’s price dipped below $42,000 late Thursday, marking a 3.7% decline since the previous day and a 15% drop from its December peak of $49,000. This decline had a cascading effect on the broader cryptocurrency market, with Ethereum (ETH) falling 2.5%, Solana’s SOL dropping 6.5%, and Cardano’s ADA losing 5% of its value.
Amidst this market turbulence, BNB Chain’s BNB outperformed, registering a 0.6% increase. The strength of BNB can be attributed to launchpads on the closely related Binance exchange, where users can stake BNB to gain allocations of new projects listed on the platform.
The price downturn resulted in significant losses for highly leveraged futures traders betting on higher cryptocurrency prices. A total of $217 million in liquidations occurred, with Bitcoin trades alone accounting for $88 million in losses.
Liquidation occurs when an exchange forcefully closes a trader’s leveraged position due to either partial or total loss of the trader’s initial margin. It happens when a trader cannot meet the margin requirements to keep the leveraged position open.
