Key Takeaways
- A $1.6B crypto selloff happened due to risky trading and panic, causing prices to drop for coins like XRP, ADA, and Ethereum.
- Rumors about Bitcoin movements and fears over new tech like quantum computing made the situation worse.
- The market is bouncing back as big investors like MicroStrategy buy more Bitcoin, showing confidence in a recovery.
On December 9, the larger digital currency ecosystem was surprised when the market lost nearly $2 billion in combined crypto liquidations. To help the market comprehend what happened, crypto expert Ash Crypto on X described the factors that precipitated the largest selloff since 2021.
Crypto liquidations started on Coinbase
Crypto liquidations began on Coinbase. According to the researchers, the market selloff began on Coinbase around an hour before the massive dump. He stated that the selling pressure caused the “liquidation like a domino.”
With the market entering a critical liquidation zone, he declared that it was game over as stop-losses were triggered in a chain reaction. Funding fees rose in the overheated market, and Open Interest (OI) skyrocketed as traders took on additional holdings.
Following this terrifying selloff, substantial buying pressure resurfaced on Ethereum. Traders saw ETH as a safe bet because it has a lesser downside than Bitcoin. XRP’s price fell by more than 12% to as low as $2.06 during the broad-based selloff.
According to the expert, XRP’s liquidity remains limited, limiting its spike potential. During the selloff, Cardano (ADA), USDC, and FDUSD saw an enormous increase in volume.
Why Did This Happen?
The crash was caused by a mix of problems. Many traders were using borrowed money (leverage) to make big bets, which created a risky situation. When prices started to fall, both long and short positions were quickly liquidated.
Rumors also added to the panic. News about large Bitcoin transfers connected to the Bhutanese government and concerns about the security of blockchain technology due to advancements in quantum computing made investors nervous. These factors added to the already shaky market.
Final Thoughts
Already, the market is recovering from the unexpected drop. Bitcoin was trading at $97,658, down just 0.68% in 24 hours. Most altcoins, notably Solana (SOL) and Binance Coin (BNB), have also recovered from their sharp declines. According to Ash Crypto, the liquidation must have eliminated “weak hands” and enabled smart money to purchase the dip at a discount. Ultimately, he predicted that the coin’s price would “snap back quickly.”
The market still has the correct moorings, which have helped it grow over the last two weeks. MicroStrategy made a big $2.1 billion Bitcoin purchase this week, proof of strong institutional presence on the market. Experts foresee a quick market recovery, with Robert Kiyosaki advising investors to buy Bitcoin now.
