What happened
A massive sell-off on Friday in the cryptocurrency market accelerated after the stock market closed on Wall Street. The selling seems to be feeding on itself, causing panic across the market.
Altcoins are down big today with some trading more than 30% lower, but the drops in giants like Bitcoin (BTC 0.02%) and Ethereum (ETH +0.71%) are staggering. As of 5:45 p.m. ET, Bitcoin is down 10.8% in the last 24 hours and 5.4% in just the last hour and a half to $35,724. Ethereum is down 16.8% in the last day and 6.9% in the last 90 minutes to $2,512.
Cardano (ADA +0.44%) has also tumbled 13.4% in the last 24 hours while Solana (SOL +1.96%) is down a whopping 19.1%. Down the altcoin list, there's rapid selling heading into the weekend.
Image source: Getty Images.
So what
There are a couple of things to look at in short-term trading. One is that liquidations are accelerating as investors with leveraged bets that crypto prices would rise are liquidated from those positions. According to coinglass.com, $1.14 billion in crypto positions have been liquidated in the last 24 hours and $416 million of that batch came in just the last four hours. This is happening across the industry, but Ethereum is being hit hardest with $113 million in liquidations in the last four hours.
As this is happening, gas fees are soaring, especially on the Ethereum blockchain. Gas is the price you pay validators to complete transactions, and the price of gas goes up when the blockchain is congested.
Yesterday at this time, the price of gas in Ethereum was 203.7 GWei and right now it's spiking over 550 GWei. At this time of day, it's not unusual for gas fees to be close to 100 GWei, so there's clearly a high level of activity, likely led by panic selling in the market.
Now what
The challenge with the situation right now is that we don't know when the selling will stop. When leverage and panic selling collide, the market can plunge quickly, especially in the cryptocurrency market which trades 24 hours per day.
One thing to worry about is some of the liquidy, or market makers who will buy when others are selling, can dry up on the weekend. I don't think it's a coincidence that the rapid selling kicked off just after the stock market closed for the weekend Friday afternoon.
Volatility is normal for cryptocurrencies but right now that's working against investors instead of for them like it has for most of the last two years. This may continue until the market finds a floor, which still may be a ways away. Long-term, there's a lot of innovation taking place in cryptocurrencies, but that doesn't mean this sell-off won't be painful for a lot of investors.
