Cryptocurrency markets experienced significant declines on Tuesday evening, triggered by a downturn in Asian futures and a wave of liquidations on the Bybit exchange.

Bitcoin and Ethereum, two of the most prominent digital assets, saw substantial drops, highlighting ongoing volatility in the sector.

Bitcoin, fell 6.2% to $59,504.68, according to data from Coin Metrics. Ethereum, saw an even steeper decline of more than 8%, bringing its price down to $2,457.61.

The sudden drop in Ethereum’s value appears to have played a significant role in the broader market sell-off.

Steven Lubka, head of private clients and family offices at Swan Bitcoin, attributed the market’s sharp decline to “a leverage-driven liquidation.”

Lubka noted that the drop in Ethereum’s price has been a major factor, given its ongoing struggle to perform relative to Bitcoin.

“The move appears to have been kicked off by a material drop by Ethereum,” Lubka added, reflecting the market’s heightened sensitivity to changes in major cryptocurrencies.

$93.52 million in ether liquidations

According to CoinGlass, the futures market experienced substantial liquidations, with $93.52 million in long ether positions being forcibly closed. Bitcoin also saw significant liquidations, totaling $85.93 million.

These liquidations occur when traders are compelled to sell their assets at current market prices to cover their leveraged positions, exacerbating price declines.

Lubka mentioned that such leverage-driven liquidations can present “great buying opportunities,” suggesting that the current market dip might be a moment for investors to consider acquiring Bitcoin at a lower price.

However, he indicated that Ethereum might continue to face challenges until there is renewed positive sentiment towards the asset.

Year-to-date gains for bitcoin at 39%

Despite Tuesday’s sharp declines, Bitcoin remains up 39% for the year, while Ethereum holds a more modest gain of 7%.

Analysts view these year-to-date gains in the context of the overall bull market, which has historically been characterized by periods of volatility and price corrections.

Ryan Rasmussen, an analyst at Bitwise Asset Management, commented on the current market dynamics, stating, “This is exactly the type of whipsaw liquidations and price action we see in bull markets.”

Rasmussen emphasized that a 5% move in Bitcoin’s price is relatively minor when viewed over a longer timeframe, indicating that the current fluctuations are part of the normal market cycle.

August volatility adds to crypto market’s unpredictability

August, typically a quieter month for both cryptocurrency and broader risk assets, has seen unusual volatility this year.

The recent retracement in cryptocurrency prices coincided with news that a federal grand jury in Washington, D.C. returned a revised indictment against former President Donald Trump in his criminal election interference case.

Trump, who has positioned himself as a pro-crypto candidate for the upcoming U.S. presidential election, has influenced market sentiment to some extent.

Bartosz Lipiński, CEO of the crypto trading platform Cube.Exchange, suggested that the instability surrounding political events might be influencing trader behavior.

“Traders don’t like instability, and often go risk-off to cash in such environments,” Lipiński said, pointing to potential correlations between political news and market reactions.

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