Bitcoin, Ethereum, and XRP Crash Triggering $637M in Liquidations

BTC-USD -4.97% ETH-USD -5.50% XRP-USD -6.69%

Bitcoin shed 5% in the past 24 hours, dragging Ethereum, XRP, and other altcoins down with it.

The top crypto is now down over 21% in the past month, ending October on a negative note. Bitcoin plunged to an intraday low of $85,694 and is currently trading around $86,800, down 31% from its all-time high, according to CoinGecko data.

Beta assets like Ethereum and XRP, which follow Bitcoin’s cues, have shed 5.6% and 6.5% respectively over the past day, highlighting the delicate situation among altcoins.

As a result of the sudden selloff, total crypto market liquidations have skyrocketed to $637 million, some $568 million of which are long  positions, according to CoinGlass data.

What drove Bitcoin’s sell-off?

The short-term factors behind Bitcoin’s weekend plunge are “straightforward,” Wenny Cai, COO of SynFutures, told Decrypt. “A rapid, momentum-driven drop forced outsized long liquidations (over half a billion dollars), which then amplified selling across spot and derivatives markets,” Cai explained, adding that, “That cascade effect is what turns a correction into a sharp short-term crash.”

One key crypto-related catalyst behind the drop is Strategy CEO Phong Le’s comments about selling Bitcoin.

“We can sell Bitcoin, and we would sell Bitcoin if needed to fund our dividend payments below 1x mNAV,” Le noted in a Friday podcast.

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Strategy holds 649,870 BTC, worth $56.26 billion at the current price, with a 1.19x mNAV, according to the company’s official website.

Comments from listed BTC holders, including Strategy CEO Phong Le, “can spark fear because they change investors’ perceived supply dynamics — even if the comments are narrowly conditional rather than an intent to sell immediately,” Cai added.

The recent S&P downgrade of MSTR stock and attendant press due to the company’s reserve composition “are a more persistent vulnerability,” the analyst noted.

Despite Le’s comments, traders on prediction market Myriad, owned by Decrypt’s parent company Dastan, appear unmoved. They place just a 5% chance on Strategy selling any of its Bitcoin before the end of the year.

Tether’s potential insolvency concerns if Bitcoin and gold fall by 30%, as highlighted by BitMEX co-founder Arthur Hayes in a Sunday tweet, also played a role in aiding the weekend crash.

Hayes noted that, “A roughly 30% decline in the gold, Bitcoin position would wipe out their equity, and then USDT would be, in theory, insolvent.”

When participants worry that crypto’s largest stablecoin issuer, Tether, might become impaired in a stress event, “liquidity premia widen, and margin desks can pull risk, which increases volatility across crypto,” Cai explained.

Another factor that may have contributed to the market’s already bearish sentiment is China’s central bank, which noted that crypto activity is illegal and raised concerns about stablecoins, according to a China Daily report.

Looking ahead, Cai expects a continued choppy, volatile trading environment in December, rather than a one-way trend with a potential “near-term washout that pressures leveraged positions, followed by rotation where long-term buyers assess value.”

Despite the sudden crash, liquidation spree, and bearish sentiment, investors remain bullish, with Myriad users putting just a 12% chance on the likelihood of a crypto winter.