What happened
As of 4 p.m. ET, Solana (CRYPTO:SOL), Polkadot (CRYPTO:DOT), and The Sandbox (CRYPTO:SAND) saw declines of 9.9%, 11%, and 8.7%, respectively, over the past 24 hours.
These major altcoins were among the biggest losers in today’s cryptocurrency sell-off, with investors appearing to continue to rotate out of higher-risk assets and into safe havens today.
One notable catalyst for this rather steep sector-wide decline were liquidations seen among crypto traders. Spot price declines among major cryptocurrencies including Solana, Polkadot, and The Sandbox have forced leveraged traders to liquidate positions, further accelerating today’s decline. Solana, Polkadot, and The Sandbox saw a respective $9.1 million, $5.8 million, and $6.1 million in liquidations over the past 24 hours alone.
Image source: Getty Images.
So what
Much of the focus of leverage in the crypto world surrounds Bitcoin, Ethereum, and other mega-cap tokens. That said, the futures market for cryptocurrencies is one that now spans an array of high-profile tokens. Like options, futures allow investors to buy tokens at an agreed upon price in the future. However, less up-front capital is required to make such trades, providing leveraged gains to the upside, and potentially wider losses during periods of downside volatility.
Now what
With spot prices decreasing across the board, over-leveraged traders have been forced to liquidate positions at an increasingly alarming rate. The extent to which this trend will continue remains to be seen. However, these liquidation numbers are becoming an important bellwether with respect to the volatility investors can expect to see in crypto markets moving forward.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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