After a strong start to December, the cryptocurrency market took a steep nosedive on Monday, with Bitcoin sinking under $95,000, while many big cap cryptocurrencies dropped by more than 10% in the past 24 hours, according to CoinGecko data.
The recent downturn also triggered liquidations of approximately $185 million in short positions.
Coinglass data indicates that roughly $1.7 billion has been liquidated over the past 24 hours, with long positions amounting to $1.5 billion and $184 million in short positions.
The VOL Monster
Despite Bitcoin’s recovery to above $97,000, the cryptocurrency market is still reeling from the recent bloodbath. Most altcoins continue to suffer, with many experiencing double-digit losses on daily charts.
Ethereum (ETH) declined 5% to $3,800, Solana (SOL) fell 5.4%, and Binance Coin (BNB) dropped 3%. Ripple (XRP), Dogecoin (DOGE), and Cardano (ADA) were among the hardest-hit top 10 cryptocurrencies, declining by 10%, 7%, and 12%, respectively, as of the latest data.
Many lower-cap assets have suffered from 10% to 30%, wiping out their gains throughout November. Only a few coins managed to buck the downward trend, but these gains were likely driven by project development or related events.
For instance, Quantum Resistant Ledger (QRL) surged 150% in tandem with the hype surrounding Google’s rollout of its new quantum chip, Willow. Or Movement (MOVE) soared over 40% following its mainnet beta launch and token airdrops.
The exact reasons behind the recent cryptocurrency market pullback are still unclear. However, traders are weighing in on a number of potential factors.
Excessive FOMO led to an imbalance between long and short positions. According to Coinglass data, the 30-day volume of long orders opened hit 0.9%, making the cryptocurrency market vulnerable to a sudden correction.
The sharp price decline triggered a wave of liquidations as over-leveraged traders were forced to sell their positions. This led to a reset of the funding rate, bringing it to a more balanced level between long and short positions.
The market correction may also present a buying opportunity for investors. Many altcoins have fallen to key support levels, which could provide a strong buying opportunity for those who believe in the long-term potential of these assets.
Historically, such as in October 2023 and December 2020, a major correction was followed by a market bull run. However, it’s important to note that while current market conditions may be favorable for long-term investors, short-term traders should exercise caution and carefully manage their risk.
Quantum FUD
An event that broke during the day may also have left a negative impact on the cryptocurrency market. On Monday, Google unveiled its new quantum computing chip, dubbed “Willow,” which the tech giant has claimed to have achieved a breakthrough in quantum computing.
Willow can solve complex calculations in under five minutes—tasks that would take conventional supercomputers an estimated 10 septillion years to complete, according to Google.
However, the release of Willow was not widely embraced by the cryptocurrency community. Discussions about its potential danger to Bitcoin and cryptocurrencies have been rife. Many investors and traders have grown anxious that Willow could eventually compromise the cryptographic foundations that secure cryptocurrencies
It’s not just about Willow, it’s about how fast the tech is scaling up. Experts warn that it could be the start of a future where quantum computers can break existing encryption methods, putting vast amounts of digital assets at risk.
Discussing the issue, Emin Gün Sirer, co-founder of Ava Labs, said that current quantum capabilities do not yet pose an immediate threat to cryptocurrencies. However, Bitcoin mined in early days, like those held by Satoshi Nakamoto, may face danger as quantum computing advances.
Sirer added that the early coins stored in the Pay-to-Public-Key (P2PK) format were more vulnerable to future quantum attacks, compared to modern formats.
Kevin Rose, a tech expert and ex-product manager at Google, stressed that quantum computers are still limited in their capabilities. Breaking Bitcoin’s encryption within a 24-hour timeframe requires an estimated 13 million qubits of quantum computing power, which is still beyond the tech’s capabilities.
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