Crypto Liquidations Surge Amid Stock Market Downturn
The cryptocurrency market has experienced over $272 million in daily liquidations amid a stock market downturn. The cryptocurrency market experienced a surge in liquidations over the past 24 hours as the price of bitcoin dropped alongside a broader exodus from risk assets.
In the past 24 hours, a total of 81,838 traders were liquidated, with the total liquidations across centralized exchanges amounting to $272 million, according to data from Coinglass. Bitcoin was the leading cryptocurrency in the liquidations, with almost $78 million liquidated in the past 24 hours. Among these bitcoin liquidations, almost $44 million of them were long positions.
Stock Market Downturn
The downturn in the cryptocurrency market came as stocks tumbled on Friday. The S&P 500 was headed for its worst session in nearly two years, as a much weaker-than-expected U.S. July jobs report stoked fears of an impending recession. The Nasdaq Composite dropped 2.9%, pushing the tech-heavy index’s decline from its recent all-time high to over 10%. The Dow Jones Industrial Average fell 863 points, or 2.1%, and was down as much as 989 points at one point in early morning trading.
Bitcoin’s Future
One analyst said the largest digital asset by market capitalization could retrace again to the same support level. “We believe that the market is currently in an accumulation phase with a potential retest of the $62,500 support incoming in the near future. With no major movement expected in a specific direction, we recommend maintaining reduced exposure,” an analyst said.
However, he added that in the medium term, as the digital asset accumulates liquidity, bitcoin could potentially break out above the $70,000 resistance level. Fournier cited factors playing into bitcoin’s current range-bound performance. He said spot bitcoin exchange-traded funds have seen only small positive net flows over the two last days.
“This indicates indecisiveness from investors but still a generally positive overall sentiment,” he added. Fournier also highlighted a particular factor that could potentially delay a clear bullish trend for bitcoin.
Kamala Harris and Bitcoin
“Kamala Harris has greatly improved her odds of winning the U.S. presidential election, triggering fears of a possible anti-crypto stance and a reduction of the enthusiasm that followed Trump’s speech and promises,” Fournier said.
Some betting sites now place Harris’s chances of victory in November ahead of Donald Trump’s. The online prediction market PredictIt now shows Harris as the favorite to win in November, with shares of her victory selling for 52 cents, while shares for a Donald Trump victory are selling at 50 cents.
Cryptocurrency Regulations
Online exchange YouHodler’s Ruslan Lienkha said cryptocurrency investors are watchful of the current vice president’s strengthening odds on multiple online prediction markets, as they see a potential Harris victory as being bearish for the largest digital asset by market capitalization.
If investors believe a Democratic administration might impose stricter cryptocurrency regulations, bitcoin’s price could suffer. Harris’s momentum in crucial swing states could intensify these concerns.
Bitcoin Options 25% Delta Skew
The difference in implied volatility between out-of-the-money (OTM) calls and puts suggests that derivatives traders are hedging against the potential for further bitcoin downside. According to Deribit’s weekly analytics report, the bitcoin options 25% delta skew shows that OTM puts have higher implied volatility than OTM calls, indicating that the market might be expecting a bearish move.
Impact on Cryptocurrency Market
The current situation has caused a significant impact on the cryptocurrency market. The daily liquidations and the stock market downturn have led to a massive exodus from risk assets. This movement has also caused a drop in the price of bitcoin and other cryptocurrencies.
The S&P 500’s worst session in nearly two years and the Nasdaq Composite’s significant drop have shown how interconnected the stock and crypto markets can be. As investors move away from riskier assets, both markets experience declines.
Bitcoin Price Predictions
Analysts are keeping a close eye on bitcoin’s support and resistance levels. The potential retest of the $62,500 support level and the possibility of breaking above the $70,000 resistance level are crucial for the future of bitcoin. These levels will determine the direction of the market in the coming months.
Investor Sentiment
Investor sentiment plays a significant role in the cryptocurrency market. The small positive net flows into spot bitcoin exchange-traded funds indicate a cautious but generally positive outlook among investors. However, the indecisiveness in the market shows that many are still unsure about the future direction of bitcoin.
Political Factors
Political factors, such as Kamala Harris’s improved election odds, also influence the cryptocurrency market. The potential for stricter cryptocurrency regulations under a Democratic administration has raised concerns among investors. If Harris wins the presidential election, it could lead to significant changes in the regulatory landscape for cryptocurrencies.
Hedging Against Downside
Derivatives traders are taking measures to hedge against the potential downside in bitcoin. The higher implied volatility of OTM puts compared to OTM calls suggests that traders are preparing for a bearish move in the market. This hedging activity indicates caution and a focus on managing risk in the current volatile environment.
The cryptocurrency market is experiencing a surge in liquidations amid a broader stock market downturn. With over $272 million in daily liquidations and significant declines in major stock indices, investors are moving away from risk assets. Bitcoin’s support and resistance levels, investor sentiment, political factors, and hedging activities will all play a crucial role in determining the future direction of the cryptocurrency market.
