Low Trading Volume Intensifies Crypto Liquidation Risk

Matrixport’s analysis on September 23 highlights increased liquidation risk in the cryptocurrency market due to low trading volume and Federal Reserve rate-induced volatility.

Major assets like BTC and ETH face liquidation pressures, prompting cautious risk management as historical patterns suggest potential volatility amid Federal Reserve decisions.

Matrixport Report Flags $1.1 Billion Crypto Liquidations

Matrixport’s recent analysis uncovers significant risks for crypto traders in a low-volume environment. Released on September 23, the report details the challenges of maintaining long positions amid potential market shifts, specifically pointing to increased volatility surrounding Federal Reserve actions and rising U.S. bond yields.

Cryptocurrency market pressures are mounting as the Federal Reserve rate decisions contribute to a more volatile trading environment. The analysis warns that technical breakdowns could lead to a wave of stop-loss orders and save traders from massive deleveraging moves, evident in the $1.1 billion liquidated positions.

Community reaction echoes concerns over these risks. CryptoQuant analyst Axel Adler Jr. described liquidation risks as “moderate,” however, indicated continued downward pressure. Statements by Arthur Hayes, BitMEX Co-Founder, suggest optimism post liquidity drain from the U.S. Treasury General Account, indicating potential recovery.

“The replenishment of the United States Treasury General Account (TGA) is nearing completion, with a target of $850 billion. Once this liquidity drain is completed, the market situation where the cryptocurrency market only goes up and never goes down can resume.” — Arthur Hayes, Co-Founder, BitMEX

Bond Yields and Federal Actions Spur Crypto Volatility

Did you know? The rise in U.S. bond yields often portends increased volatility in cryptocurrency markets, illustrating a recurring pattern seen during prior Federal Reserve interest rate cycles.

As of 07:06 UTC on September 23, Bitcoin (BTC) trades at $112,991.84, influenced by a 57.68% market dominance. Over 24 hours, BTC saw a 0.10% increase despite a broader 7-day decline of 2.47%. CoinMarketCap data indicates a robust $57.97 billion trading volume, marking a 36.94% change.

Coincu research highlights ongoing caution over financial outcomes related to integrated trading strategies and potential regulatory responses. Historical patterns suggest maintaining rigorous risk controls is advisable as market participants navigate these volatile periods.