The market’s worth, which had surpassed $1 trillion on Wednesday morning, fell below $900 billion as traders reacted to speculations of liquidity issues at the significant exchange FTX. Unexpected traders liquidated long bets worth roughly $700 million over the past 24 hours.
The crypto market value of Bitcoin and Ethereum is decreased by more than 8% from the previous day, reaching lows last seen in early October and interrupting a slight recovery. XRP, Dogecoin, and Cardano all experienced declines of over 12% while Solana, whose noteworthy advocate Sam Bankman-Fried is, saw a 25% loss.
Futures tracking ether and bitcoin were liquidated for a total loss of $390 million, while liquidations for SOL futures lost $40 million. The fact that liquidations for FTT futures were far smaller at $27 million shows that spot token sales were mostly to blame for the steep fall.
When an exchange forcibly closes out a trader’s leveraged position due to a partial or complete loss of the trader’s initial margin, this is known as liquidation.
A trader fails to have enough money to keep the trade open when they cannot meet the margin requirements for a leveraged position. The native FTT tokens of FTX, which are also controlled by Sam Bankman-Fried, were found to be in large quantities on the balance sheet of Alameda Research, a cryptocurrency trading company, according to CoinDesk.
This meant that Alameda was primarily based on a coin that a sister company generated rather than relying on a standalone asset like fiat money or another cryptocurrency.
Due to the expectation that FTX would go bankrupt, market participants sold FTX-linked coins to reduce their possible losses. Competitor Binance started to sell off more than $500 million worth of FTT it held on its books, which sparked a 24-hour drama that culminated with Binance agreeing to purchase FTX, which is now widely seen as being insolvent.
Such market trends worried the cryptocurrency markets as traders responded to the possible risks. Prices for FTT dropped by 70% to levels seen in the middle of 2021. Thus, the above analysis has improved the $100 billion drop in the crypto market value in the past 24 hours. Stay connected with TechGenyz for more updates.
