This article is also available in Spanish.
The overall cryptocurrency market saw a huge drop on December 9. While the price of Bitcoin fell from $101,109 to just $94,150, marking a -7% drop, the altcoin market suffered significantly more severe losses. Ethereum fell as much as -12% at one point, XRP -22%, Solana -15%, Cardano -23%, Dogecoin -19% and Shiba Inu -25%.
According to Coinglass dataMore than 562,000 traders were liquidated in the last 24 hours and total liquidations reached $1.7 billion. The largest single liquidation order took place on Binance in the ETHUSDT pair, valued at $19.69 million. Of the $1.7 billion in total liquidations, $1.55 billion were long positions.
Notably, Bitcoin’s leverage increase was relatively modest compared to that of altcoins, with $143 million in BTC long positions liquidated. In contrast, ETH recorded liquidations of $219 million, $57 million for SOL, $86 million for DOGE, $53 million for XRP, and $22 million for ADA.
Across the cryptocurrency market, this represented the largest increase in leverage since April 2021, when a record $10 billion in cryptocurrency futures liquidations occurred in a single day. This surpassed the previous record of $5.77 billion.
Related reading
Following the crisis, Bitcoin and most altcoins experienced a strong recovery, although they have not yet returned to their pre-crisis levels. In the last 24 hours, BTC remained down -2.4%, ETH -4.8%, XRP -9.6%, SOL -6.4% and DOGE -8.4% .
What caused the crypto market to crash?
According to cryptanalyst ltrd (@ltrd_), the underlying dynamics began with increased selling pressure on Coinbase, where traders began selling aggressively almost an hour before the big waterfall. Although the final drop was triggered by a chain reaction of liquidations, this prolonged selling in the spot markets was instrumental in pushing prices into areas where overleveraged traders had no choice but to relax.
Overheated funding fees and rising open interest levels meant that once the initial cracks appeared, heavily leveraged positions had no chance to escape. “How can we know that the market was overheated? It’s simple: the financing fee plus the increase in open interest. These two factors are drivers of the current market and indicate that people are excessively leveraged,” explained ltrd.
When the market finally collapsed, its effects were uneven. Bitcoin showed distinct characteristics from other instruments, and Ethereum showed encouraging signs of accumulation on the way down, hinting that a major buyer may have been taking advantage of the opportunity.
However, the truly surprising developments occurred with XRP on Coinbase, where, as ltrd said, “You can see something crazy: the impacts on the XRP market on Coinbase are mind-blowing. Something absolutely strange happened. In a large and relatively mature market, we witnessed a cascade of large sell orders that caused the market to drop more than 5%. “We don’t know exactly what happened, but it’s certainly unusual.” Ltd speculated that these huge and abnormal sell orders may have come from a major player forced to liquidate at any price.
Related reading
“It may be worth following this situation over the next few days. “Perhaps an important actor was forced to sell as if there were no tomorrow,” he reflected. The consequence of such an event, even in supposedly deeper markets, was a rapid decline that spread to perpetual swap trading elsewhere, triggering further sell-offs.
According to ltrd, “when something like this happens, it’s usually a cascade of unintended orders. “Market makers absorb this selling pressure and protect it, causing signals to propagate across exchanges.” Even large-cap altcoins like XRP, which have market caps on par with major US companies, still face liquidity constraints that become evident under stress. “Relative to these market caps, liquidity in the market remains tight,” he noted, explaining how this contributes to the observed volatility and dramatic nature of such events.
As prices finally stabilized and began to rebound from their lowest points, ltrd highlighted how this pattern is common in overheated markets: “The next thing you always see in a hot market is a rapid price reversal from the bottom. lower. There are a lot of liquidations, limited liquidity and still many players in profits who want to buy the dip. Let’s see who wins.”
Macroeconomic analyst Alex Krüger put the entire event in a broader perspective. “Nothing has changed. “Expect prices to continue rising,” he said, while noting that future conditions, such as a pro-crypto US administration under Donald Trump, could set a more constructive backdrop for digital assets.
Although Krüger cited the possibility of further waves of leverage in the coming months, he viewed these developments as a normalizing force. “Today was a great leverage exit. Mainly for altcoins. Very normal in hot and highly leveraged markets. “This is how cryptocurrencies baptize newcomers and keep crypto natives disciplined,” Krüger said, adding: “It’s never fun to be stuck for long in a leverage situation. But that’s what this is. Funding back to baseline across the board. This time it also changes. Expect more of this in the coming months.”
At press time, Bitcoin was trading at $97,401.
Featured image from Shutterstock, chart from TradingView.com
