Ether Futures Lead $1.2B in Liquidations, Crypto Market Cap Drops 16% Overnight

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Ether futures led liquidation losses in the past 24 hours as crypto markets lost over 16% of their overall capitalization, data from multiple sources show.

Liquidations in the crypto market happen when a trader has insufficient funds to fund a margin call – or a call for extra collateral demanded by the exchange to keep the trading position funded. They’re especially common in high-risk trading due to the high volatility of assets. It occurs in both margins and futures trading.

Traders of ether futures lost $333 million to liquidations as the asset lost 22% to drop under the $1,900 level. This was the highest among all cryptos, with bitcoin futures seeing $330 million in losses and futures tracking Terra’s LUNA racking up $130 million in losses.

Losses exceeded $1.2 billion in the past 24 hours, the highest so far this year. They came as major cryptocurrencies saw steep drops: Bitcoin fell 11%, BNB Chain’s BNB lost 26%, and Solana’s SOL lost 37%. Terra’s LUNA fell out of the top ten cryptos by market capitalization to the 81st rank – it fell 96% in the past 24 hours to under 40 cents.

Crypto exchange OKX saw $393 million in liquidations, the highest among all crypto exchanges, followed by Binance at $389 million and Bybit at $155 million.

Data shows 83% of all futures were long, or betting on higher prices, despite weakness in the overall market earlier this week. Much of the systemic risk arose from terraUSD (UST), a stablecoin issued by Terraform Labs, losing its peg with the U.S. dollar and causing a cascading effect on decentralized finance (DeFi) platforms running on Terra.

Contagion associated with UST likely spread over to the broader market alongside inflation fears and weak CPI data, fuelling a drop in crypto prices.

Meanwhile, data shows open interest – or the amount of unsettled futures contracts – fell 10% in the past 24 hours, implying traders removed liquidity and exited positions in anticipation of further volatility.