$1.1T gone! Here’s why the crypto market could see another liquidation cascade
Key Takeaways
Is one other crypto market wipeout seemingly?
With $1.1 trillion erased and macro volatility returning, the crypto market stays weak to cascading losses.
How are traders positioning?
Skinny bid help and excessive leverage threat are tilting investor choice towards shares, whereas crypto struggles to discover a steady footing.
Is the crypto market gearing up for one more October-style cascade?
From a capital-flow standpoint, that setup isn’t unrealistic. Over the previous 41 days, the crypto market has erased $1.1 trillion in complete market cap. And nonetheless, the market cap is 10% under the degrees seen through the October crash.
In brief, an actual market restoration hasn’t kicked in but.
Consequently, HODLers’ persistence is getting severely stress-tested.
And with macro volatility returning, circumstances are tightening quick. So is the market gearing up for one more main wipeout earlier than an actual restoration begins?
Crypto market fragility reaches a breaking level
The market is so fragile that one bearish transfer may set off a cascade.
To start with, the TOTAL Crypto Market Cap has printed back-to-back crimson candles, reflecting almost a 20% outflow over the past three days alone. Consequently, roughly $1.8 billion has been flushed out of the derivatives market.
Notably, 73% of those liquidations got here from lengthy positions, totaling $1.3 billion.
This, in flip, helps Tom Lee’s current argument that leverage is eroding investor threat urge for food, preserving any significant restoration on maintain.
Supply: CryptoQuant
Constructing on that, the information is in keeping with what’s occurring on-chain.
Bitcoin [BTC] reserves have began to rise once more, with holdings on CEXs climbing 0.63% over the previous three days to 2.395 million BTC. In sensible phrases, that’s 15k BTC flowing again, roughly $1.4 billion at present costs.
Put merely, the crypto market doesn’t have a robust sufficient bid to soak up extra volatility.
So the actual query is, what occurs now that the U.S. authorities’s reopening brings key financial information again into the combination?
A brand new week of macro stress begins, placing markets on alert
The week is full of a heavy lineup of economic data.
Each September and October releases (together with the roles report) are lastly set to come back out after the shutdown pushed them into backlog. However past the macro prints, there’s one other main catalyst on deck.
Nvidia [NVDA] is about to report earnings, with an implied move of +/- 7.5%, signaling a $345 billion swing in market cap. That’s an enormous quantity of capital with clear potential to affect flows into the crypto market.
Supply: TradingView (NVDA/USD)
Notably, this divergence is translating into value motion.
On a quarterly foundation, NVDA remains to be up 1.92%, whereas BTC is down 16.64%, marking its weakest This autumn since 2019. Zooming in, NVDA closed its final trading day on the 14th of November up 1.77% vs. BTC’s 5.2% dip.
Total, with volatility excessive, bid help skinny, and leverage threat elevated, traders are favoring shares over crypto.
Towards this backdrop, as macro stress builds, one other crypto market cascade appears to be like more and more seemingly.
