Crypto Market Heats Up: Massive Liquidation Wave Rocks Traders Amidst Record Leverage
The cryptocurrency market is currently experiencing a dramatic surge in liquidations, signaling a worrying trend of increased leverage usage among traders. This shift has amplified market volatility, making price corrections significantly more aggressive and impactful, according to a recent report by Glassnode and Fasanara.
Escalating Volatility and Historic Deleverage
The past months have seen a sharp rise in daily liquidation volumes. Average daily wipeouts for long positions have soared from approximately $28 million in the previous cycle to an estimated $68 million in the current one, with short positions following a similar trajectory, jumping from $15 million to $45 million. A prime example of this heightened volatility occurred on October 10, dubbed an "Early Black Friday Shock," where over $640 million in long positions were liquidated within an hour as Bitcoin plummeted from $121,000 to $102,000. This event also saw open interest decline by roughly 22% in under 12 hours, plunging from nearly $50 billion to $39 billion, marking one of Bitcoin's most intense deleveraging events to date.
Record Market Activity and Bitcoin's Expanding Influence
Beyond liquidations, futures markets have witnessed unprecedented growth, with open interest hitting a record $68 billion and daily turnover surpassing $69 billion in mid-October. Perpetual contracts now constitute over 90% of this activity, concentrating risk due to their continuous resetting nature. Simultaneously, spot trading has doubled in volume, ranging from $8 billion to $22 billion daily. During the October 10 crash, hourly spot volume spiked to $7.3 billion, as many traders chose to "buy the dip," influencing where price discovery occurs. This period has also brought substantial capital inflows into Bitcoin, with monthly figures fluctuating between $40 billion and $190 billion, propelling its realized market capitalization to a record $1.1 trillion. Since November 2022, approximately $730 billion has flowed into the Bitcoin network, exceeding the combined inflows of all previous cycles and solidifying Bitcoin's market dominance, which has risen from 38% in late 2022 to a robust 58% today. This massive throughput, processing nearly $7 trillion in transfers over the last 90 days—surpassing major card networks—underscores Bitcoin's growing recognition not just as a store of value, but as an increasingly vital global settlement rail.
