The crypto market registered a major slump on Friday, resulting in major cryptocurrencies losing key support and falling to new monthly lows after a prolonged bullish surge over the past month.
Bitcoin (BTC), which was looking to break through the $25,000 resistance level last week, fell below $22,000 to register a new two-week low of $21,747. Ether (ETH), the second-largest cryptocurrency, had surged past $2,000 in the run to the Merge but has slumped by 6% over the past 24 hours to register a new weekly low of $1,726.
After weeks of bullish momentum, the flash crash also saw 157,098 traders get liquidated in the past 24 hours, resulting in total liquidations of over $551 million. Data from Coinglass indicates that Bitcoin traders lost over $203 million, followed by Ether traders at $140 million.
The following chart shows that the number of liquidated long positions outnumber the short ones by a significant margin, indicating that market sentiment was highly bullish until the flash crash. The value of short positions liquidated was only $41 million against $398 million in long positions.
BTC futures long liquidations reached an eight-month high of $84,934,697.05 on OKX, breaking the previous high of $48,630,183.66 observed on May 5.
The sudden plunge in the crypto market is being attributed to the United States Federal Reserve’s expected interest rate hike in September. August consumer price index data came out as lower than expected, leading to a bullish surge in crypto and foreign exchange markets alike.
Federal Reserve Bank of St. Louis President James Bullard said he would favor an increase of 75 basis points. An interest rate hike by the Fed next month could lead to another downturn. A similar interest rate hike of 75 basis points in June led to crypto market turmoil after an initial price surge.