Cryptocurrency traders who had maintained their long or bullish positions faced severe losses in the past 24 hours, as the Clarity Act failed to secure the necessary votes in the Senate.
Widespread Liquidations in the Market
According to data, exchanges liquidated approximately $571 million from long positions during this period, marking the highest amount since August 22. Short positions accounted for only about $100 million of these liquidations.
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Bitcoin and Ethereum suffered the most, with approximately $190 million in their long positions being liquidated. Analysts had predicted that Ethereum and DeFi tokens would likely perform better than Bitcoin if the Clarity Act were approved. Long positions in XRP lost about $30 million, and long positions in Solana lost around $22 million.
Reasons for the Market Crash
Data shows that markets were poised for a bullish trend, primarily based on hopes for progress on the Clarity Act. These hopes were bolstered earlier this week when reports indicated that former President Donald Trump was open to accepting some ethical provisions of the bill. However, the market reacted positively to this news, and Bitcoin rose from around $77,000 to nearly $80,000.
The upward trend began to reverse in the past 24 hours as reports emerged that Democrats were still holding firm on their positions. These reports were accurate, and the bill failed to pass the 60-vote threshold in the Senate. Nevertheless, efforts to pass the law are not completely over, as the CFTC and SEC can continue to advance their regulations.
Liquidations occur when the market moves against a trader's positions and market losses reach a level where there is insufficient collateral to support the trade. In this case, the trader must deposit additional funds, or the exchange is forced to close the position.
Forced liquidations can increase volatility, although so far, the damage appears to be limited. Currently, Bitcoin is trading at around $75,700, still within its recent range.
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