On Wednesday, cryptocurrencies recovered most of the losses from the sell-off that occurred the day before, shortly after bitcoin reached an all-time high.
Coin Metrics reports that Bitcoin increased 7.9% to $67,273.54 at its most recent price, while ether surged almost 13% to $3,872.56, its highest level since January 2021.
At $69,210 on Tuesday, bitcoin set a new intraday record—the first since November 2021. It had been rising for weeks, rising 55% in the last month, and then it crashed soon after reaching a new high.
David Wells, CEO of Enclave Markets, said, “It seemed like a bullish sharp correction yesterday, which is fairly typical when you reach a multiyear all-time high.”
Given the sizeable options holdings, he continued, “there will probably be a second test of the highs, and if we break that, it could get interesting.” Sharp corrections during these meltdowns are probably connected to leveraged long momentum bets that took gains at critical points before reentering the market at a reduced level.
According to CoinGlass, early of Wednesday morning, centralized exchanges had carried out $236 million in long liquidations and $100 million in short liquidations in the previous 24 hours.
When traders short bitcoin using leverage and the price of the cryptocurrency rises, they buy bitcoin back from the market to cover their bets, which drives up the price and results in the liquidation of more holdings.
According to David Duong, head of institutional research at Coinbase, “at first, it looked like this was primarily a spot-driven profit-taking move as open interest in perpetual futures didn’t come down, nor did their corresponding funding rates come off.” However, the market was reset when the price action caught up to a few significant, protracted liquidations. Unless there is a significant external shock, I don’t think we’ll see another significant decline like this one anytime soon.
Alongside ether and bitcoin, other cryptocurrencies saw a rise. Solana gained 9.5%, and Binance coin jumped 12%. The two most profitable coins were memes, with Shiba Inu rising 21% and Dogecoin gaining 18%.
Crypto stocks increased as well. Microstrategy and Coinbase increased by 18% and 10%, respectively. Cipher Mining increased by 27%, while CleanSpark and Iris Energy saw increases of 6% and 8%, respectively. Riot Platforms decreased by 1% and Marathon Digital increased by 1.6% among the biggest miners.
