The cryptocurrency market experienced a significant downturn, resulting in the loss of billions in value and marking one of the most precipitous single-day declines in recent memory, according to an expert interview with FOX Business.
This abrupt fall was precipitated by the U. S. government’s announcement of new tariffs on technology imports from China, a development that unsettled investors and incited panic throughout the market.
Joshua Duckett, the director of investigations at a digital currency forensic firm, remarked that traders were compelled to liquidate their positions, causing prices to plummet.
“Most individuals do not invest more than they can afford to lose; however, in the cryptocurrency sector overall, particularly concerning leveraged trading, the losses extend into the billions,” Duckett clarified.
“The extent of losses varies among individuals. Some have lost hundreds, thousands, or even millions, with total liquidations amounting to billions,” he added.
Bitcoin, the premier cryptocurrency, dipped below $110,000, while Ethereum and other significant tokens experienced declines exceeding 20% within mere hours.
Traders who had heavily borrowed to capitalize on rising prices were unexpectedly caught off guard, leading to a series of forced liquidations that further accelerated the downturn.
“The response of the cryptocurrency market was more pronounced compared to the stock market due to its continuous operation,” Duckett stated. “While the stock market may react negatively, the cryptocurrency market exhibited a more pronounced response. “
“There has been a downturn across various cryptocurrencies, which have declined in value over the past 24 hours, primarily attributable to market news and its repercussions on cryptocurrency traders,” Duckett elaborated.
Leverage, the practice of borrowing to amplify exposure, he indicated, was a significant contributor to the losses.
“Individuals can borrow against their assets and leverage to extreme extents, up to 100 times in cryptocurrency, which is quite substantial,” Duckett observed.
“When these positions are liquidated, significant movements—whether upward or downward—occur. In this instance, it was a downward movement. “
The number of individuals globally owning at least $1 million in cryptocurrency has surged over the past year. The rapid unwinding of these leveraged trades triggered a chain reaction. “This resulted in a spiral of cascading liquidations, essentially,” Duckett noted.
Nevertheless, there are preliminary indications that the market may be stabilizing. “It appears to have stabilized,” Duckett stated. “Currently, we seem to be in a position of rebound towards stabilization. Tomorrow brings a new opportunity. “
“We have endured a full day of impactful news affecting the markets, leading to the initial instinctual reactions toward recovery and stabilization. The progression will significantly depend on the new information released tomorrow,” Duckett concluded.
The primary principle is to refrain from investing more than one can afford to lose — however, this guideline is not exclusive to cryptocurrency; it pertains to investing as a whole. Furthermore, conducting thorough research on the assets one is investing in is also a crucial component of the process.
