The optimism that buoyed the crypto market last week came crashing down as a wave of selling triggered over $400 million in liquidations across major cryptocurrencies. Solana (SOL) and Dogecoin (DOGE) bore the brunt of the decline, highlighting the market’s volatility.
Bitcoin (BTC), the bellwether of the cryptocurrency space, fell over 5% after a strong week. Analysts attribute this pullback to positive economic data in the US, which strengthened the dollar and dampened investor appetite for riskier assets like crypto.
Solana, a high-speed blockchain platform, witnessed a steeper drop of 7%, falling below the crucial $200 mark it briefly touched earlier. Dogecoin, the meme-inspired cryptocurrency, took an even harder hit, plummeting over 8%.
This sudden downturn resulted in significant liquidations, a process where leveraged positions are forced to close due to insufficient funds to maintain them. Data shows that over $400 million in long positions, essentially bets on rising prices, were liquidated. This suggests that many investors were caught off guard by the market reversal.
Experts point to a few potential causes for the shakeout.
A stronger dollar can make dollar-denominated cryptocurrencies appear less attractive. Additionally, profit-taking by long-term holders, particularly after Bitcoin’s recent gains, could have contributed to the selling pressure.
Analysts at crypto exchange Bitfinex believe Bitcoin may enter a period of consolidation in the coming weeks, with some long-term holders selling off their holdings. They also suggest the market might be susceptible to further fluctuations as broader economic factors play out.
This recent turbulence underscores the inherent volatility of the cryptocurrency market. While the long-term outlook for crypto remains a topic of debate, investors should be prepared for price swings and exercise caution when making investment decisions.
