Ether Futures Lead $1.2B in Liquidations, Crypto Market Cap Drops 16% Overnight

The past 24 hours were among of the biggest crypto market drops in recent months.

May 12, 2022 at 6:14 a.m. UTC
Updated May 12, 2022 at 3:18 p.m. UTC

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Ether (ETH) futures led liquidation losses in the past 24 hours as crypto markets lost over 16% of their overall capitalization, data from multiple sources shows.

Liquidations in the crypto market happen when a trader has insufficient funds to fund a margin call – or a call for extra collateral demanded by the exchange to keep the trading position funded. They’re especially common in high-risk trading due to the high volatility of assets. It occurs in both margins and futures trading.

Traders of ether futures lost $333 million to liquidations as the asset lost 22% to drop under the $1,900 level. This was the highest among all cryptos, with bitcoin futures seeing $330 million in losses and futures tracking Terra’s LUNA racking up $130 million in losses.

Ether dropped some 20% in the past 24 hours. (TradingView)

Losses exceeded $1.2 billion in the past 24 hours, the highest so far this year. They came as major cryptocurrencies saw steep drops: Bitcoin (BTC) fell 11%, BNB Chain’s BNB lost 26%, and Solana’s SOL lost 37%. Terra’s LUNA fell out of the top 10 cryptos by market capitalization to the 81st rank – it fell 96% in the past 24 hours to under 40 cents.

Crypto exchange OKX saw $393 million in liquidations, the highest among all crypto exchanges, followed by Binance at $389 million and Bybit at $155 million.

Data shows 83% of all futures were long, or betting on higher prices, despite weakness in the overall market earlier this week. Much of the systemic risk arose from terraUSD (UST), an algorithmic stablecoin issued by Terraform Labs, losing its peg with the U.S. dollar and causing a cascading effect on decentralized finance (DeFi) platforms running on Terra.

Contagion associated with UST likely spread over to the broader market alongside inflation fears and weak CPI data, fueling a drop in crypto prices.

Meanwhile, data shows open interest – or the amount of unsettled futures contracts – fell 10% in the past 24 hours, implying traders removed liquidity and exited positions in anticipation of further volatility.

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Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

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