Crypto Liquidations Hammer Bulls

Crypto Liquidations Hammer Bulls

5 months ago

Leveraged crypto bulls had to take the biggest L since late January, after $428 million longs were liquidated.

Crypto Liquidations Hammer Bulls


In recent weeks, crypto bulls have been on the back foot, and yesterday's price drop delivered another body blow to their ambitions.

The $428 million worth of liquidated longs were the most lost since January 22, when $470 million long positions were liquidated. Like in late January, this liquidation wave was the second in quick succession. Back then, liquidations came on back-to-back days, wiping out more than $1.4 billion worth of longs. This time, bulls had a bit of a breather after more than $400 million worth of long liquidations followed by yesterday's low blow.

Is Max Pain for Crypto Yet to Come?

Equity markets were down across the board, with the Dow closing 1.19% lower while the Nasdaq dropped 2.18%. Markets in Japan and Singapore were also down as traders braced themselves for additional pain on the horizon.

The culprit, of course, is inflation.

Remarks by White House Press Secretary Jen Psaki warned of "extraordinarily elevated" inflation data ahead of the new CPI numbers coming out on Tuesday.

While estimates put year-on-year inflation data in March to exceed 8%, traders may anticipate even worse — with the corresponding knock-on effects for capital markets.

Rising inflation numbers have also led to more hawkish talks from Fed officials, and markets now anticipate more than eight rate hikes in 2022 alone. While the White House has branded accelerating inflation as the "Putin Price Hike," due to rising commodity prices following the war in Ukraine, not everyone is buying into this reasoning:

For crypto, none of this is positive news. As crypto markets rocketed upwards with expansive monetary policy, they may fall back down as the Fed puts the clamps on cheap money. Although the technology is in a much better place now than it was at the end of Bitcoin's last bull run, traders expect more downside in the short term. Arthur Hayes, a high-profile crypto investor, predicted $30,000 Bitcoin and $2,500 Ethereum at the end of Q2 in his latest essay called The Q-Trap.

Crypto bulls may want to go easy on the leverage in the coming weeks if they want to avoid a third liquidation record in short succession.

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