Bitcoin, Ether Volatility overwhelms both bears and bulls; Some say recent price action driven by banking crisis

Higher-than-usual market volatility affected both bulls and bears as crypto futures racked up $300 million in liquidations over the past 24 hours.

Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It occurs when a trader is unable to meet the margin requirements for a leveraged position (does not have sufficient funds to keep the trade open).

Large liquidations can signal the local top or bottom of a steep price movement, which can allow traders to position accordingly.

Bitcoin and ether briefly crossed $26,000 and $1,770 respectively on Tuesday as investors brushed off the longer-term effects of a regulatory cut on crypto-friendly banks and US consumer price index (CPI) data pointed to slowing inflation in the coming months.

But the euphoria was short-lived as both major tokens fell as much as 5% from Tuesday’s highs before gradually stabilizing. In Asian morning hours on Wednesday, bitcoin was trading just under $25,000 while ether was trading just above $1,700.

The volatility saw over $140 million in bitcoin futures and $80 million in ether futures take losses. Of this, 58% of futures losses came from shorts, or bets against price rises, while the remainder came from longs, or bets on price rises – meaning that both short sellers and long traders were hit almost equally.

Among other major tokens, futures on Conflux’s CFX tokens and Filecoin’s FIL saw $8 million and $5 million in liquidations, respectively, as trading volumes for both rose due to fundamental developments.

Meanwhile, some market observers said the price action came as investors looked for alternative assets after last week’s collapse of Silicon Valley Bank.

“Bitcoin’s rally to a new annual high as Silicon Valley Bank falls and inflation remains stubborn shows that investors are looking to bitcoin for stability in highly uncertain market conditions,” Alex Adelman, co-founder of bitcoin rewards app Lolli, told CoinDesk.

“While many have viewed bitcoin as a hedge against inflation and tracked its price movements accordingly, bitcoin’s relationship with traditional finance is more complex,” Adelman stated, adding that bitcoin served as an “alternative to the traditional financial system at large .”

“Weakness across the banking sector has heightened investor awareness of bitcoin’s unique value proposition. In the coming weeks, we will continue to see increased demand for bitcoin as a superior system for securely holding and moving money,” Adelman said.