Crypto Markets Feel the Pinch as $1.2 Billion in Leveraged Positions Are Liquidated Amid Credit Concerns

Francisco Rodrigues reports that Bitcoin's value dropped below $105,000, erasing its early-week gains, due to rising concerns about credit market stress and a surge in forced liquidations in the crypto space. Over $1.2 billion in leveraged crypto positions were liquidated in the last 24 hours, according to CoinGlass data, with the broader crypto market experiencing an 8.89% decline based on the CoinDesk 20 index. This downturn coincides with increased anxiety in traditional markets over credit, following the bankruptcies of First Brands and Tricolor, which have sparked questions about the health of corporate debt markets and led to a decline in risk asset prices. JPMorgan CEO Jamie Dimon has warned that these events could be indicative of deeper credit issues, stating, 'When you see one cockroach, there are probably more.' This uncertainty has spilled over into crypto markets, where leveraged traders are scrambling to cover their positions, with nearly 79% of liquidated trades being long positions, reflecting overly optimistic expectations of a rebound. Bitcoin is currently performing better than altcoins, many of which have suffered double-digit losses. According to Thomas Chen, CEO of Function and former TradFi executive, 'If we're in a highly levered situation with altcoins and Bitcoin drops 10%, altcoins can easily drop 40-50% if interest remains weak, and it's game over.' Chen notes that the 'altcoin' bucket is typically the first to be dumped under low market confidence conditions. The current macroeconomic backdrop, marked by fears of a prolonged US-China trade dispute, regional bank fragility, and weakening confidence in long-dated sovereign bonds, is exacerbating market concerns, despite the likelihood of the Fed cutting interest rates. This fear has driven gold prices toward $4,400 and pushed 10-year Treasury yields below 4%, with gold-backed tokens like XAUT and PAXG benefiting from the rise in the precious metal and outperforming the wider market. Chen cautions that 'markets often overreact and then correct themselves.' For more information on upcoming events, see CoinDesk's 'Crypto Week Ahead.'