More than $106 million in Ethereum long positions were liquidated on Binance within one hour, reaching the highest hourly long liquidation total in about six months.
According to an assessment by CryptoQuant analyst Darkfost, reported by Wu Blockchain, higher-than-expected U.S. inflation hit leveraged investors betting on an Ethereum rally. The hourly liquidations of more than $106 million on Binance reached a level not seen in the exchange’s ETH long positions for about six months.
Long positions are opened in anticipation of a price increase. If the price moves in the opposite direction and margin is insufficient, these positions can be forcibly closed.
Futures trading volume reached nine times spot volume
Darkfost noted that futures trading volume in the crypto market had risen to about nine times spot volume. According to the analyst, the dominance of leveraged trading makes the market more sensitive to macroeconomic surprises such as inflation.
For this reason, the impact of inflation data is not limited to price movements; leveraged investors can also face forced closures of their positions. Ethereum long liquidations on Binance were an example the analyst highlighted as evidence of this vulnerability.
Expectations of a Fed rate hike strengthened
The analyst’s assessment also stated that expectations that the Fed would raise interest rates again rose from 17% to about 30% in one week. Darkfost said this shift increased pressure on derivatives markets.
Thus, both high levels of leverage and changing expectations for U.S. monetary policy emerged as factors behind the liquidation wave in Ethereum.
Not investment advice.