Crypto slaughterhouse: what did the latest crash teach us, and what will happen to the market next?

Another crash in the cryptocurrency market has turned into a real crypto slaughterhouse: overnight, investors lost $1.7 billion, and 560,000 traders were affected by liquidations. Experts attribute this drop to a number of interesting factors, from Google’s breakthrough in quantum computing to political processes in the United States. Was it possible to predict this event? And what will happen to the market next?

Is everything gone?

From December 9 to 10, the cryptocurrency market experienced one of the largest declines in the last few years. The price of Bitcoin (BTC) dropped to $90,500, Ethereum (ETH) — dropped to $3,465, and Solana (SOL) was trading around $200. Some altcoins lost more than 30% of their value overnight. In total, liquidations within 24 hours reached $1.7 billion, of which $1.54 billion were long positions. More than 560 thousand traders were affected.

Most positions were liquidated among fans of 10x leverage. Many assets were liquidated even at 5x leverage, which many market participants consider relatively safe. On being careful with loans and other ways to reduce risks in the market, we wrote here.

Pros data trader ltd, these liquidations were the largest since 2021.

This collapse caused widespread panic among traders, but what exactly caused this situation? Let’s find out.

The main reasons for the collapse of the crypto market

On the eve of the market crash, the famous analyst Jamie Coates published a detailed forecast on bitcoin and the global economic environment. According to the expert, the global money supply (M2) is currently at the stage of stabilization, which is directly related to the depreciation of the US dollar. The US Federal Reserve recognizes the excessive restriction of financial conditions and is considering many measures to improve the situation.

Кhe US Dollar Index (DXY) showed signs of a «false breakout», which is usually a positive signal for the markets. Bitcoin has the potential for further growth, but it will be short-lived without improved liquidity.

«Easy money has already been earned», — Coates noted, emphasizing the need for a cautious approach to investing.

The expert drew attention to the delay between global liquidity and bitcoin dynamics, which could affect the further behavior of the cryptocurrency market. In his forecast, Coates encouraged investors to be cautiously optimistic and to closely monitor economic indicators.

He also wrote that the Market Sentiment Indicator (MSI) turned «bearish» in mid-October, but Donald Trump’s victory in the US presidential election triggered a strong rebound. A similar situation occurred in February, but the launch of ETFs and fund inflows supported bitcoin for another month. However, the persistently negative liquidity in the market eventually took its toll.

Trump’s victory delayed the correction.
The rise in the price of bitcoin to $100 thousand led to increased sales by holders (long-term holders). This sent the price trajectory downward. According to CryptoQuant experts, since November 8, long-term investors have reduced their positions by 827,783 BTC ($81.2 billion).
Excessive leverage and massive liquidations created a chain reaction. Panic selling of assets caused prices to fall further.
Google announces a breakthrough in quantum computing with the announcement of the Willow chip. This caused concern about possible security risks to cryptocurrencies. Speculation about potential vulnerabilities in cryptography has caused panic among investors.
The sale of 406 bitcoins by the Bhutanese government (equivalent to $40 million) significantly increased the supply on the market, putting additional pressure on prices.
Historically, before a halving, bitcoin goes through phases of correction and reaccumulation. The current drop follows this pattern.

What will happen to the market next?

Recent events have once again (and for some, at great cost) reminded us of the importance of following the news, analyzing macroeconomic factors, and managing risks carefully.

Trader ltrd pointed out that in a hot market, after a price drop, there is always a quick reversal upwards. A large number of trades are closed automatically, there is little liquidity, but there are many participants who want to take advantage of the opportunity and buy assets on the drop.

In fact, this is what we are seeing. Cryptocurrencies are gradually recovering their prices (as of December 11).

According to CryptoQuant analysts, major market participants are unlikely to allow bitcoin’s price to move above $100 thousand. Speculative sentiment on exchanges is weakening. In the short term, we should not expect the bitcoin price to continue growing.

On the contrary, Jamie Coates believes that bitcoin may continue to move upward over the next 2-3 months.

In general, despite the current downturn, most experts believe that it was just a correction on the way to new highs. The run-up to the next bitcoin halving, which will take place in 2028, has historically seen an accumulation of assets. In addition, the demand for cryptocurrencies remains high, especially amid the growing popularity of decentralized finance (DeFi) and NFTs.