CME Group Chairman and CEO Terry Duffy has weighed in on how crypto trading platform Coinbase has lost half of its value over the past week.
Cryptocurrency markets were rocked by a dramatic plunge on Saturday, one of the steepest single-day declines in recent history, wiping out billions of dollars in value, one expert told FOX Business.
The sudden collapse occurred after the US government’s announcement. new tariffs The move spooked investors and caused panic.
Joshua Duckett, Chief of Investigations crypto forensics companysaid traders were forced to liquidate their positions and prices went into free fall.
“Most people don’t invest more than they can afford to lose, but across the cryptocurrency industry, that’s billions of dollars in terms of leveraged trading,” Duckett explained.
A neon sign indicates that Bitcoin is accepted inside the venue of the Paralerni Polis Project, an organization combining art, social science and modern technology in Prague, Czech Republic. (Milano Haros/Bloomberg via Getty Images/Getty Images)
“The amount of money people have lost varies. Some have lost hundreds, thousands, even millions, but the total liquidation is in the billions.”
Bitcoin, the largest cryptocurrency, fell below $110,000, and Ethereum and other major tokens lost more than 20% of their value within hours.
Traders who had borrowed heavily in bets that prices would rise were caught off guard, sparking a wave of forced liquidations and accelerating the crash.
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At the New York Stock Exchange, traders are at work while the opening bell rings. (Johannes Eisel/AFP via Getty Images/Getty Images)
“The crypto market has had a more extreme reaction than the stock market because it operates 24/7,” Duckett said. “Stock markets will have a bad reaction. Cryptocurrency markets have had a more extreme reaction.”
“There has been a market downturn with multiple cryptocurrencies declining in value over the past 24 hours, primarily due to market news and the impact that news has had on people trading in the crypto market,” Duckett explained.
He said leverage, which involves borrowing to increase exposure, was a major factor in the losses.
“People can borrow what they have and leverage it to an extreme amount of essentially 100x in crypto, which is a significant amount,” Duckett noted.
“So when those positions are liquidated, there will be a big move either upwards or downwards, in this case downwards.”
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The number of people who own at least $1 million worth of cryptocurrencies has skyrocketed around the world over the past year. (license/image)
The sudden unwinding of these leveraged trades set off a chain reaction. “This essentially set off a spiral of chain liquidations,” Duckett said.
Still, there are early signs that the market is stabilizing. “It seems basically stable,” Duckett said. “Right now we’re at a point where we’re starting to rebound and stabilize. Tomorrow will be a new day.”
“We’ve had a full day of this kind of market-impacting news and the initial knee-jerk reaction to recovery or stabilization. Everything basically depends on tomorrow’s new news,” Duckett added.
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“The first rule is to never invest more than you can afford to lose. But that applies to all investments, not just cryptocurrencies. Also, researching what you are investing in is an important part.”
