Crypto Derivatives Market Suffers $673 Million Liquidation: Long Positions Take a Hit

The cryptocurrency derivatives market has experienced a turbulent 24-hour period, marking its second consecutive day of significant liquidations. A total of $673.12 million (around KRW 900 billion) in trading positions were wiped out on October 25. Long (buy) positions, representing investor bets on rising prices, bore the brunt of the selloff, accounting for a staggering 78% of the total liquidations or $524.51 million. This sharp downturn emphasizes the heightened risks facing traders in a volatile market environment.

Bitcoin and Ethereum Dominate Liquidation Metrics During Price Declines

Bitcoin (BTC) played a central role in the liquidation wave, with the cryptocurrency dropping 2.15% to $11,6359. According to data from Coinglass and CoinMarketCap, this decline triggered $109.32 million in liquidated long positions. A particularly notable single liquidation event of $17.35 million occurred on the BTC-USDT perpetual futures contract on the OKX exchange, underscoring the intensity of market pressure.

Ethereum (ETH) followed suit with a modest price decline of 0.46%, which led to $93.05 million in liquidated long positions. Additionally, $60.62 million in short (sell) positions were also liquidated, highlighting the dual-edged risks inherent to cryptocurrency derivatives trading and the market's marked volatility.

Altcoins Face Severe Selloffs: Solana, Ripple, and Dogecoin in Focus

Among major altcoins, Solana (SOL) experienced one of the sharpest declines, with its value plummeting by 5.98%. This drop resulted in $45.33 million worth of liquidated long positions, making it one of the hardest-hit cryptocurrencies during the market's downturn.

Ripple (XRP) and Dogecoin (DOGE) also faced steep losses. Ripple saw $37.95 million in liquidated long positions, while Dogecoin recorded $25.43 million in similar losses. These liquidations reflect the heightened sensitivity of altcoins to abrupt market downturns and their knock-on effects on investors seeking short-term gains.

High-Intensity Liquidation in a Compressed Timeframe

A close analysis of liquidation data reveals that this market downturn’s most significant impact occurred within a tightly clustered time window. Approximately 98% of liquidations during a 1-hour period were from long positions—an extremely disproportionate concentration. This suggests that sudden downward price adjustments triggered immediate and widespread position closures, effectively cascading through the market.

Extending the analysis to a cumulative 4-hour window, long liquidations accounted for 95% of all liquidations, signaling a gradual but intensifying selloff. Notably, the total value of liquidations during the peak 1-hour period exceeded that of the preceding 12-hour cumulative figure. This disproportionate activity highlights the severity of market pressures experienced in this compressed timeframe.

Declines in Open Interest Signal Waning Confidence

The persistent selloff has also led to a significant decline in open interest (OI), a key metric that represents the total number of outstanding contracts in the derivatives market, including futures and options. Bitcoin leads the market in OI with $84.99 billion, followed by Ethereum with $53.09 billion and Solana with $10.37 billion. However, the latest data reveals sharp daily declines in OI for Ethereum and Solana. Ethereum saw a notable reduction of $1.37 billion in OI, while Solana followed with a decline of $939 million. These contractions may signal an accelerated exit of positions, as traders retreat amid heightened liquidation pressures.

Navigating the Risks of Cryptocurrency Volatility

The current downturn in the cryptocurrency market underscores the persistent volatility that characterizes the sector. Derivatives traders, in particular, face disproportionately high risks during periods of sharp price movements. This wave of liquidations serves as a stark reminder of the potential for rapid losses in this speculative and fast-paced trading environment. Leveraged positions in futures and options can magnify returns, but they also significantly amplify downside risks, especially during abrupt and unpredictable price corrections.

As the cryptocurrency market evolves, understanding liquidation trends and analyzing key metrics like open interest are becoming crucial for traders looking to manage risk effectively. With sudden market moves capable of triggering cascading effects, a cautious approach that factors in the sector’s inherent volatility may prove to be prudent.