Most of the liquidations came from Bitcoin and Ether, which accounted for $555 million and $336 million, respectively. But altcoins like XRP, EOS and Litecoin (LTC) also saw large liquidations as the market plummeted.
The lion's share of the liquidations happened on Binance, while Bitfinex saw the least. This suggests that the former may have the biggest share of novice traders, according to Bitfinex chief technology officer Paolo Ardoino.
"Bitfinex has almost 1B in open interest but extremely low liquidation rate compared to competition," explained Ardoino.
"Finex seems to have traders that use leverage slightly more carefully."
Factors behind the short-term price drop
Bitcoin was relatively resilient compared with the rest of the market during the correction. Mostly, large-cap altcoins and decentralized finance tokens saw the biggest losses, such as Cosmos' ATOM and SushiSwap's SUSHI dropping by over 20% in a single day.
The market likely corrected as a result of the altcoin futures market being extremely overheated for a prolonged period.
In recent weeks, many altcoins on platforms like Binance Futures saw funding rates spike to around 0.3% to 0.7%. This is 30 to 70 times higher than the average 0.01%.
This is likely the reason behind Bitcoin’s relatively small drop of around 7% compared with the 20% to 30% corrections in the altcoin market.
But unlike Bitcoin, Ether showed short-term weakness even as Bitcoin was rallying to a new all-time high, as Cointelegraph reported.
Hence, when BTC began to fall, Ether saw a much larger loss compared with Bitcoin, dropping by 9% in the same period.
Throughout February, especially when the ETH/BTC pair was showing strength, ETH saw a smaller pullback compared with Bitcoin as it entered price discovery. The weakness of ETH against Bitcoin has had a negative impact on the altcoin market in the last 24 hours.
Why a recovery is likely
According to Ki Young Ju, CEO of CryptoQuant, there are enough stablecoin reserves in the cryptocurrency exchange market to trigger another leg up for Bitcoin.
In the crypto market, sidelined capital is often stored in stablecoins rather than cash or in bank accounts because they are much easier and faster to deploy on exchanges. Ju said that it is an ideal time to buy Bitcoin, given that a newfound rally is more likely. He wrote:
“If you're a long-term investor, now is the time to buy $BTC. Not sure how many corrections would be along the way, but the on-chain indicator says there are enough stablecoins in exchanges compared to Bitcoins to get another leg up.”
In addition to favorable fundamentals, altcoins have begun to recover quickly after a capitulation-like correction.
Following the strong relief rally of altcoins, Bitcoin and Ether followed suit, recovering to $48,000 and $1,800, respectively.
The combination of the swift recovery of large-cap altcoins and the abundance of stablecoins on exchanges raises the probability of the BTC rally to continue.