Liquidation Volume Drops in Crypto Derivatives Market as Traders Await Fed Decision

The cryptocurrency derivatives market has experienced a significant reduction in liquidation volumes, with a drop of more than 50% compared to the previous day's figures. This decline indicates a cautious, wait-and-see sentiment among market participants ahead of the U.S. Federal Reserve's anticipated September interest rate decision. Alongside this, trading activity has slowed, contributing to tempered market volatility.

Diverging Liquidation Trends Across Assets

Liquidation trends have varied across cryptocurrencies, revealing differences in market dynamics. Ethereum (ETH) and Dogecoin (DOGE) saw substantial unwinding of long positions, while altcoins such as Solana (SOL) and HyperLiquid (HYPE) experienced targeted short liquidations.

Key Data and Liquidation Insights

On September 17 (Korea Standard Time), data from Coinglass showed that $175.95 million (approximately 243 billion Korean won) worth of positions were liquidated across all assets over the previous 24 hours. This total includes $106.58 million (about 147 billion won) in long liquidations and $69.35 million (around 95.8 billion won) in short liquidations. Importantly, the total daily liquidation volume plunged by 62.37%, down from the $467.6 million recorded the day before. This marked decline reflects a market seeking equilibrium amid uncertainty.

Ethereum led liquidation volumes, with $55.22 million liquidated—making it the cryptocurrency with the highest activity. Specifically, ETH's long liquidations reached $42.18 million (about 58.3 billion won), while short liquidations amounted to $13.04 million (roughly 18.1 billion won). The asset’s price saw a modest dip of 0.47% during the same period, reflecting a mixed sentiment among traders.

In comparison, Bitcoin (BTC) experienced notable short liquidations. Of the $22.62 million (approximately 31.2 billion won) liquidated, $6.21 million (about 8.6 billion won) involved short positions, while $16.41 million (around 22.7 billion won) were long liquidations.

Altcoin Liquidation Breakdown

Liquidation patterns in altcoins showed significant variation. For instance, XRP, DOGE, and SUI exhibited strong long liquidation trends. Atena (ENA), an Ethereum-based token, reported $1.18 million (approximately 1.6 billion won) in long liquidations, greatly exceeding its $720,000 (around 1 billion won) in short liquidations.

In contrast, SOL, HYPE, and Binance Coin (BNB) saw more pronounced short-position liquidations. HYPE, in particular, recorded total liquidations of $240,000 (about 300 million won), with short liquidations comprising 70.83% of this amount—equivalent to $170,000 (around 200 million won).

Market Liquidity and Sentiment Overview

Liquidity across the broader market has tightened significantly. Over the past 24 hours, total trading volume contracted by 19.43%, falling to $241.9 billion (approximately 334 trillion Korean won). Meanwhile, open interest—a metric reflecting the number of open positions—held steady at $221.3 billion (around 306 trillion won). This stability in open interest underscores that while liquidations and trading activity have slowed, many existing positions remain unaltered.

Investor sentiment has remained neutral, with little indication of biased optimism or pessimism. The Fear and Greed Index rested at a balanced 50, and the Relative Strength Index (RSI) was recorded at 42.35. Though the RSI reading is near the threshold of oversold territory, it remains within the neutral range, signaling subdued trading energy.

What’s Next for the Crypto Market?

The combination of lower liquidity, reduced liquidation volumes, and neutral sentiment highlights a cautious market environment as traders await clarity from the Federal Reserve’s upcoming policy decision. With market participants hesitant to aggressively reposition, the current pause reflects a temporary lull rather than a long-term shift.

Notably, the steady levels of open interest suggest that market structures are still intact, leaving room for potential volatility post-announcement. The Federal Reserve’s economic outlook and interest rate trajectory could catalyze significant market moves, depending on the perceived implications for the broader financial landscape.

Until then, the cryptocurrency market appears to be in a holding pattern, with investors opting for a strategic wait-and-see approach. This measured stance sets the stage for potentially sharp price swings as soon as the Fed’s decision is revealed.