Long Squeeze Sparks $83M Crypto Liquidation in Just 5 Minutes

• Bitcoin’s price has tumbled by 3% but has shown signs of recovery.
• The selloff appears to have been driven by macroeconomic factors.
• A substantial surge in the U.S. Dollar Index has added another layer of complexity.

Crypto markets underwent a sweeping downturn, commencing in the early hours of Monday morning, resulting in a staggering liquidation of approximately $83 million worth of crypto assets within a mere five-minute window.

Over 50,000 Traders Liquidated Amidst Bitcoin’s Sharp Decline

During this period, Bitcoin’s price experienced a sharp decline of 3%, plummeting to the $29,000 level. However, as of the latest update, it has recovered some losses, bouncing back to the $29,280 area.

Coinglass data revealed that most positions liquidated were leveraged long, leading to a squeeze toward the downside and causing losses of around $30.22 million in BTC. This drastic move resulted in the liquidation of over 50,000 traders within just one hour.

The primary driving force behind this widespread crypto selloff does not appear to be orchestrated by any particular news event but rather seems to be a response to macroeconomic factors.

Crypto Selloff Not News Driven, Macroeconomics Hold the Key

International government bond yields experienced a retreat as the final week of July commenced, with notable declines in the US 10-year Treasury note yield, which plummeted to 3.81%.

Additionally, there was a sense of unease due to the anticipation of crucial interest rate decisions from influential financial institutions, including the US Federal Reserve, the European Central Bank (ECB), and the Bank of Japan.

According to the CME FedWatch Tool, there is an astonishing 99.8% probability of a 25 basis points rate hike by the Federal Open Market Committee on July 26. This would bring the Fed funds rate to 525-550 basis points.

Simultaneously, the U.S. Dollar Index (DXY) experienced a substantial surge, propelling it to 101.25. Traders should closely monitor the DXY amidst the unfolding of key macro events this week, as it is highly likely to trigger significant directional movements following a week brimming with volatility.

On the Flipside

• While the crypto markets experienced a sweeping downturn, it’s worth noting that such fluctuations are not uncommon in the volatile world of cryptocurrencies.
• This liquidation event, while significant, wasn’t even the most substantial witnessed this month. However, its timing coincided with considerable uncertainty in Bitcoin’s price movement.

Why This Matters

Liquidation events serve as a stark reminder of the inherent volatility in the cryptocurrency space. The rapid price fluctuations and extensive use of leverage underscore the risks of trading digital assets. Events like these could become more common as the crypto market grows and gains mainstream attention.

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