An online web3 media platform, WatcherGuru, reported “Over $100,000,000,000 wiped out from the crypto market cap in the past 24 hours,” on an X post.
According to the Coinglass liquidation heatmap, approximately $345 million worth of Ethereum positions were liquidated, while $172 million worth of Bitcoin positions were liquidated. In addition to these, Solana and XRP lost more than $50 million as some of the major tokens.
When breaking down liquidations by position type, Coinglass data shows that over $880 million in long positions were liquidated, compared to only about $177 million in short positions. This stark imbalance highlights a significant market movement that deserves attention. The long-to-short ratio currently stands at roughly 5:1, underscoring the heavy pressure on leveraged long traders.
Imbalance in long and short positions
When there’s a big imbalance between long and short position liquidations, it usually means the market just made a sharp move in one direction, forcing traders on the opposite side to close their positions in bulk. Bitcoin crashed from around $124.2K to around $117.5K, and Etherem crashed from $4.75K to $4.4K a much smaller dip compared to Bitcoin.
Why did the crash happen?
The July Producer Price Index (PPI), which is an economic indicator that measures the average change of prices that domestic producers receive for their goods and services, came in a bit too harshly. The PPI rose 0.9% throwing off all forecasts and estimates of analysts, which were set at 0.2% and 0.0% in June.
It’s not just the PPI that exceeded expectations — the Core PPI, which tracks the average price change producers get for goods and services (excluding food and energy), also jumped 0.9% in July, exceeding the 0.2% expected and 0.0% in June. Core CPI year-over-year rose 3.7% against 2.9% expected and 2.6% in June.”
Why does crypto react negatively to PPI?
When the PPI is high, it signals rising inflation, meaning producers are paying more for goods and services, which can eventually lead to higher consumer prices. Markets interpret this as a sign that central banks, like the Fed, may raise interest rates to cool inflation. Higher rates make safer investments, such as bonds or savings, more attractive compared to volatile assets like crypto. As a result, investors often sell cryptocurrencies, reducing demand and pushing prices down.
Is this liquidation out of the ordinary?
David Siemer, co-founder and CEO of Wave Digital Assets, speaking to a prominent crypto media stated, “The pullback is, in my view, simply a recalibration in an otherwise bullish trend,”. The expert stated that just like Bitcoin prices rose with increased institutional acquisition, expectations of Fed rate cuts, and large ETF inflows, even the BTC crash is “equally normal.”
After a rally, it is normal for a profit-taking trend to set in, and short-term traders liquidate their positions and take gains. “It’s a healthy consolidation rather than a reversal,” stated Siemer.
