Crypto markets are having their worst day since August. Bitcoin is down 7.3%, Ether has fallen 7.5%, and the total crypto market cap (TOTAL) is defending $1.5T. Is this pullback a chance to buy the dip?
Over $480M in long and short trades have been liquidated during the last 24 hours as a result of the market volatility, making this liquidation event the largest since early November.
As longs comprised 90% of the liquidations, perpetual funding rates fell considerably. While BTC funding rates have come in from a stretched 0.030% to a comparably healthier 0.013%, they remain at an elevated level.
When perpetual funding rates are positive, longs pay shorts to compensate for the price of the perpetual instrument being higher than the spot price of an asset. At funding rates above 0.01%, longs are at greater risk of getting squeezed out of their positions.
Leverage in crypto markets has been building up practically unchecked since September, with open interest on Bitcoin futures swelling 92% to $19.2B; it is only natural that small pullbacks will occur to punish over-leveraged buyers.
While there are no guarantees that the selling has ceased, many expect crypto markets to rally into 2024, driven by narratives of spot BTC ETF approval and in anticipation that external capital will flood crypto markets.
Funding has gotten pretty ridiculous. Removed all leverage for the first time in months. pic.twitter.com/yBaLJMCnel
— mhonkasalo (@mhonkasalo) December 9, 2023