- Several major cryptocurrency exchanges, including Coinbase Global Inc (COIN.O) and Kraken, have reported delays in transactions. Some transactions were delayed or terminated, according to a statement released by Coinbase. According to Reuters, Coinbase Global Inc warned its apps may be experiencing issues.
- Meanwhile, according to Reuters, another cryptocurrency exchange, The Gemini, has announced that it has temporarily entered a full maintenance period to investigate an exchange-related issue that has created performance issues.
- Reuters reports that anything related to cryptocurrencies has had a difficult time. Coinbase (COIN.O) has lost 4.02 per cent of its value. Riot Blockchain (RIOT.O) and Marathon Digital Holdings (MARA.O), both cryptocurrency miners, lost 7.38 per cent and 7.76 per cent, respectively. The stock price of MicroStrategy Inc (MSTR.O) dropped 7.64 per cent.
Due to a halt in crypto trading, the price of prominent cryptocurrencies like bitcoin and ethereum falls. Bitcoin, the world’s most popular cryptocurrency, has lost more than 17% of its value. According to Reuters, the price of Ethereum has dropped by 11.99 per cent. El Salvador has become the first country to recognise Bitcoin as a form of legal money. El Salvador will accept bitcoin payments in addition to the US dollar, which has been the country’s official currency since 2001.
Why did the price fall?
Long positions in a perpetual futures market pay a charge to short positions to keep the derivative price in line with the underlying index, and funding rates were far into the positive. To put it another way, long position holders were paying rates in excess of 50% on a regular basis to keep their positions open.
A 50 per cent annualised funding rate shows that there is a broad swath of traders prepared to pay that much for leverage in the hopes of earning more from a move to the upside, therefore greater funding rates are typically considered as an indication of a leveraged and exuberant market.
As the price of Ethereum and Bitcoin falls. It became evident that this was due, at least in part, to traders’ leveraged positions. According to Bybt, a data provider, about $2 billion in liquidations took place in the hour following Ethereum’s ascent to $3,000. As of the publication of this piece, just under $4 billion has been liquidated in the previous 24 hours.
Is the market, then, doomed? Not at all. This isn’t meant to be financial advice, but the fundamentals of this young market remain favourable by all accounts.
More than $5 million worth of Ethereum was burnt forever in ten minutes due to an NFT dip earlier today.