What happened
In the cryptocurrency sector, wild swings are often viewed as par for the course. Accordingly, some of the incredible moves we've seen in recent days among the top cryptos by market capitalization may not necessarily feel out of the ordinary.
That said, Bitcoin, Ethereum, and Dogecoin have each seen incredible moves to the upside and downside over the past day.
Yesterday afternoon, between approximately 4 p.m. and 5 p.m. ET, these three tokens plunged around 7% in the span of an hour. This move coincided with reports from blockchain analytics firm Arkham that crypto wallets tied to defunct crypto exchange Mt. Gox and the U.S. government reported large transactions. Since this report was published, these three tokens have made back most of their losses but are still down 2.3%, 2.8%, and 3.1%, respectively, over the past 24 hours.
Interestingly, the rapid decline in the price of Bitcoin took place just before the alert was tweeted out, with some experts suggesting that hundreds of millions of dollars in liquidations were responsible for the move in Bitcoin, Ethereum and Dogecoin.
So what
It's quite a coincidence that the mini flash-crash seen in these three tokens over the past day coincided pretty closely with reports of large transactions from these two dormant accounts. These large transactions reportedly were not linked, meaning that it's unlikely the U.S. government was selling or transferring assets tied to Mt. Gox, one of the first major crypto exchanges to be hacked, file for bankruptcy, and be linked to allegations of fraud. However, it's hard to say what specifically would have driven such a sharp move lower, which resulted in mass liquidations.
The most feasible explanation for the wild swings in these three top tokens is, once again, massive liquidations of leveraged positions. The crypto market is one that continues to move in a more volatile fashion, in part due to the relatively high use of derivatives for traders to place bets on the movement of particular cryptos. When everything goes right, this can lead to faster moves to the upside. However, when these long contracts are liquidated (essentially resulting in selling pressure), downside moves can be accelerated.
Now what
The fact that Bitcoin, Ethereum and Dogecoin are working their way back to breaking even following these massive moves yesterday afternoon is a good sign for crypto bulls. With these liquidations out of the way, crypto investors appear focused on accumulating tokens on this dip. A buy-the-dip mentality appears to be forming once again among top crypto assets, suggesting that the bull rally we've seen in digital assets thus far in 2023 may have some legs yet.
Of course, there are many macro factors that could derail this impressive rally we've seen this year. But for now, these three top tokens appear to have impressive bullish momentum.
