Crypto Market Plummets 12% as $30 Billion Evaporates in Sell-Off

This week, the cryptocurrency market faced its most severe sell-off in months, with a total market value evaporation of approximately 30 billion dollars. The core driver of this decline was the concentrated liquidation of tens of billions of dollars in long positions within the perpetual futures market. According to data, over 3 billion dollars in long positions were liquidated across major exchanges. This high-leverage-induced stampede quickly shifted the market's optimistic sentiment to panic.

Ethereum, the second-largest cryptocurrency, led the decline, experiencing a roughly 12% drop and breaking below the crucial support level of 4000 dollars. Bitcoin, the largest cryptocurrency, also saw a decline of about 5%, marking its largest drop since March and hovering near the lower end of its recent trading range. The market sentiment plummeted to its lowest point since the summer, reflecting the broader impact of the liquidations on the industry.

The sell-off pressure was also evident in exchange-traded funds. Bitcoin and Ethereum ETFs listed in the United States faced significant pressure, with a combined net outflow of over 5 billion dollars on Thursday alone. The market downturn was more a release of systemic risk rather than a fundamental collapse. Market participants were forced to adopt a defensive stance. Due to a wave of liquidations on Monday, most traders were caught off guard. Following the initial decline, there was a defensive adjustment of derivative market positions, with significant deleveraging in the futures market and large-scale purchases of put options continuing through the middle of the week.

Some traders warned that the true extent of leverage in the system remains difficult to gauge, as most platforms do not disclose complete liquidation data. Another factor exacerbating this week's pullback was the significant slowdown in purchasing by corporate buyers who had previously flooded the market. It was this force that had recently driven both Bitcoin and Ethereum to record highs. The purchasing volume of digital assets by listed companies has plummeted from 64,000 Bitcoins in July to 12,600 Bitcoins in August and only 15,500 Bitcoins from September to the present, a drop of 76% compared to the summer's frenzy.

This year, these digital asset management companies have raised over 440 billion dollars through various financing methods, with the initial plan to convert Bitcoin and other tokens into financial infrastructure. However, some stocks that had raised funds through so-called PIPE (private investment in public equity) transactions have seen their trading prices drop by as much as 97% from their issue prices. Currently, analysts generally believe that market momentum is weakening. The fact that Bitcoin briefly fell below a key level this week for the first time since early September is seen as a sign that the market is overheating and entering a slowdown phase. Despite this, there are no signs of a full-blown panic in the market. A senior vice president at a market-making firm believes that this correction is a "healthy adjustment."

Although Bitcoin has fallen below its 100-day moving average and the total market value of digital assets has fallen below 400 billion dollars, there are no signs of panic. However, short-term pressure may continue to drive prices lower, especially considering the increasing correlation between digital assets and macro sentiment this year. The market downturn underscores the volatility and risk inherent in the cryptocurrency market, particularly when high-leverage trading is involved. The liquidations and subsequent price drops have left many investors reeling, highlighting the need for caution and risk management in this volatile asset class.