Crypto Market Hit Hard With $1.7 Billion Liquidated, Largest Event Since 2021

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The cryptocurrency market faced a severe correction on December 9, triggering a massive wave of liquidations totaling $1.7 billion—the largest single-day event since April 2021. Over 562,000 traders were caught in the storm as prices across major digital assets plunged, exposing the fragility of highly leveraged positions in an overheated market.

Bitcoin dropped from $101,109 to a low of $94,150, marking a -7% decline, while altcoins bore the brunt of the sell-off. Ethereum fell by as much as -12%, XRP by -22%, Solana by -15%, Cardano by -23%, Dogecoin by -19%, and Shiba Inu by -25%. The sharp correction wiped out billions in unrealized gains and reset market sentiment almost overnight.

Scale of the Liquidation Wave

According to Coinglass data, long positions accounted for **$1.55 billion** of the total $1.7 billion in liquidations—highlighting how aggressively traders had bet on continued price increases. The remaining $150 million came from short liquidations, suggesting limited bearish pressure before the crash.

Among individual assets:

The largest single liquidation occurred on Binance’s ETHUSDT perpetual contract, valued at $19.69 million, underscoring the concentration of risk in high-leverage derivatives trading.

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What Triggered the Market Crash?

Crypto analyst ltrd (@ltrd_) identified early signs of distress on Coinbase, where unusual selling pressure began nearly an hour before the broader market collapse. This spot market selloff acted as a catalyst, pushing prices into zones where overleveraged futures traders faced margin calls.

“Funding Fee plus the increase in Open Interest—these two factors are drivers of the current market,” ltrd explained. “They indicate that people are overleveraged.” When funding rates rise alongside growing open interest, it signals excessive bullish sentiment, making markets vulnerable to sharp reversals.

Once the initial dip occurred, cascading liquidations accelerated the downward spiral. Market makers absorbed large sell orders and hedged their exposure across exchanges, propagating the price drop globally—a phenomenon known as signal propagation.

Why Was XRP’s Behavior So Unusual?

One of the most puzzling aspects of the crash involved XRP on Coinbase. Despite its large market cap—comparable to major U.S. corporations—XRP exhibited extreme slippage during the selloff. ltrd noted: “You can see something crazy—the market impacts for XRP on Coinbase are mind-boggling… Something absolutely strange happened.”

He speculated that a major holder may have been forced to liquidate at any cost, flooding the market with large sell orders that dropped prices by over 5% in seconds. “It might be worth monitoring this situation over the next few days. Perhaps a major player was forced to sell as if there were no tomorrow.”

This highlights a critical issue: even assets with high market capitalizations can suffer from poor liquidity depth, especially during sudden volatility. When large orders hit thin order books, prices can swing dramatically—triggering automated stop-losses and further amplifying losses.

Market Reaction and Recovery Patterns

After hitting lows, most cryptocurrencies staged a strong recovery, though they have yet to reclaim pre-crash levels. Over the past 24 hours:

Notably, Bitcoin displayed relative strength compared to altcoins, with on-chain data suggesting long-term holders continued accumulating during the dip. Ethereum also showed signs of institutional buying, indicating strong support at lower levels.

ltrd observed a familiar pattern: “The next thing you always see in a hot market is a quick price reversal from the lowest point… There are a huge number of liquidations, limited liquidity, and still many players in profit who want to buy the dip.” This classic “buy the panic” behavior often sets the stage for renewed upward momentum.

Macro Outlook: Is This a Reset or a Warning?

Macro analyst Alex Krüger provided broader context, stating: “Nothing’s changed. Expect prices to still go up.” He believes that despite periodic leverage flushes, the long-term trajectory for crypto remains bullish—especially under potential regulatory shifts like a pro-crypto U.S. administration.

Krüger described the event as a “normalizing force”:

“Today’s was a major leverage flush out. Mainly for altcoins. Very normal in hot and highly levered markets. This is how crypto baptizes newcomers and keeps crypto natives disciplined.”

He expects more such events in the coming months as funding rates normalize across exchanges. While painful for those caught on the wrong side, these corrections help purge excess speculation and strengthen market resilience.

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Key Takeaways for Traders

  1. Leverage is a double-edged sword: High leverage magnifies gains but increases vulnerability during volatility.
  2. Spot market moves matter: Large sell-offs on major exchanges like Coinbase can trigger chain reactions in derivatives markets.
  3. Liquidity ≠ Market Cap: Even large-cap assets can experience severe slippage when order book depth is shallow.
  4. Buy-the-dip psychology persists: After major corrections, disciplined investors often re-enter, fueling recoveries.

Frequently Asked Questions (FAQ)

Q: What caused the $1.7 billion crypto liquidation event?
A: A combination of overheated funding rates, rising open interest, and sudden selling pressure on Coinbase triggered a cascade of margin calls, leading to widespread liquidations—especially among leveraged altcoin positions.

Q: Why did altcoins drop more than Bitcoin?
A: Altcoins typically carry higher leverage and lower liquidity than Bitcoin. When volatility spikes, these factors amplify price swings and increase liquidation risks.

Q: Was this the biggest liquidation ever?
A: No—it was the largest since April 2021, when a single-day liquidation event reached $10 billion. However, it ranks among the top 5 largest in crypto history.

Q: Are leverage flushes bad for the market?
A: Not necessarily. While painful in the short term, they help reset speculative excesses, normalize funding rates, and improve long-term market health.

Q: Can such crashes be predicted?
A: Warning signs include rising funding rates, surging open interest, and increasing spot market sell volume—indicators closely watched by experienced traders.

Q: What should traders do after a major liquidation event?
A: Reassess risk exposure, reduce leverage, monitor on-chain and order book data, and prepare for potential bounce opportunities once volatility subsides.

At press time, Bitcoin was trading at $97,401, showing resilience despite recent turbulence.

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