Recently, the cryptocurrency market saw one of the most catastrophic corrections of the year, which led to the liquidation of long positions valued at almost $350 million. The bulk of cryptocurrencies saw their prices fall by an astounding 30% during a quick but turbulent period of two to three days. Investors are in a state of disarray as they struggle to make sense of the sharp decline in the value of their portfolios as a result of the market turbulence.
Short sellers also had to deal with a painful reality in addition to the severe losses suffered by those who gambled on a rising market. Short bets totaling around $50 million were closed off; they were most likely started at what seemed to be regional price bottoms. But the market once more shown its volatility, as a strong price reversal caught short sellers off surprise and resulted in substantial losses.
Different cryptocurrencies experienced losses of varying intensity, with some seeing more severe declines than others. Cardano (ADA), which experienced a staggering 40% price fall at its lowest point, was at the severe end of the spectrum. Not far behind, Binance Coin (BNB) took a 23% plunge. Although XRP and Ethereum (ETH) fared much better, shedding 11% and 7% of their respective valuations, respectively, the decline was still sizeable.
Assets that the SEC recently classified as “securities” in their case against Coinbase suffered even more, which furthered the turmoil. The added regulatory ambiguity appeared to increase market turbulence and drive the values of these particular assets even lower.
The current market downturn serves as a clear reminder of the danger that comes with cryptocurrencies. Retail investors’ response to the SEC’s list of digital assets that are now regarded as securities has been comparatively muted, but institutional investors will continue to liquidate the majority of their holdings, putting pressure on the market.
