Crypto market crash: $1 billion liquidations

On 9 May, when the still ongoing collapse began, asset liquidations totaling about $1 billion occurred in the crypto market in just a few hours. 

The crypto market is experiencing really difficult days

Given that total trading volumes are around 300 billion a day, such a high volume of liquidations in such a short time has had a significant impact on the market itself. 

Taking into consideration the total market capitalization of all cryptocurrencies, on 9 May it had dropped from $1.7 trillion to $1.6 trillion from the previous day. The next day, however, it had already dropped to 1.450 billion, while on 11 May it was more or less unchanged. 

Today, however, it appears to have dropped to $1.250 billion, which is 26% lower than four days ago. 

It is worth noting that this calculation also includes the market cap of stablecoins, which in theory should not vary significantly in such a short time. 

As of 21 April, however, the capitalization was $2 trillion, reducing in three weeks by 37%. 

The issue that triggered this wave was the implosion of Terra (LUNA), or the top 10, which lost almost all of its value in just a few days. 

Panic then spread to traditional financial markets as well, due to worse-than-expected US inflation data in April, though better than in March. 

Finally, panic spread due to the fear that after the stablecoin of the Terra ecosystem, other stablecoins, Tether in primis, would also break up. 

The stormy movement of stablecoins

Instead, USDT after momentarily falling as low as $0.98 quickly climbed back up to $1, only to fall again just above $0.99. In contrast, it is worth noting that USDC rose as high as $1.06, only to fall back to $1.01. 

Terra’s algorithmic stablecoin, UST, plunged as low as $0.3 yesterday, only to rise again to $0.83. Since 9 May, it has now failed to recover what in theory should be its value, which is $1, and at this point, many are beginning to fear that it will not make it. 

However, none of the other major stablecoins pegged to the dollar have suffered a similar fate, while instead USDN (Neutrino USD) between today and tomorrow has fallen as low as $0.7. 

As evidenced by the liquidation of $1 billion of positions in a few hours, there has been real panic brewing in the crypto markets for days, which emerged clearly today with the unwarranted drop in USDT. 

In fact, on Tether’s official website it is always possible for anyone to return USDT tokens in exchange for $1, and as long as that mechanism holds, a significantly lower price to the dollar for this token is totally unjustified. 

GM
Reminder that tether is honouring USDt redemptions at 1$ via https://t.co/fB12xESSvB .
>300M redeemed in last 24h without a sweat drop.

— Paolo Ardoino (@paoloardoino) May 12, 2022

Finally, it is worth noting that the peak of fear during this period was reached on 10 May, although a new low may be touched today.