Terry Duffy, Chairman and CEO of CME Group, believes that cryptocurrency trading platform Coinbase has lost half its value in the last week.
The crypto market suffered a dramatic decline on Saturday, one of the sharpest one-day declines in recent history, wiping out billions in value, an expert told Fox Business.
The sudden collapse occurred after the US government announced new tariffs on Chinese tech imports, a move that unsettled investors and caused panic.
Joshua Duckett, Investigations Director crypto forensics firmSaid traders have been forced to liquidate positions, leading to a continued decline in prices.
“Most people don’t invest more than they can lose, but in the crypto industry as a whole, in terms of leveraged trading, it’s in the billions,” Duckett explained.
A neon sign indicates that Bitcoin is accepted inside the venue of the Parallely Polis project, an organization combining art, social science and modern technology in Prague, Czech Republic. (Milan Jaros/Bloomberg via Getty Images/Getty Images)
“The amount of money people have lost varies. Some people have lost hundreds, thousands, millions, with the total amount spanning billions in liquidation cases.”
Bitcoin, the largest cryptocurrency, fell below $110,000, while Ethereum and other major tokens lost more than 20% of their value in a matter of hours.
Traders who had borrowed heavily to bet on rising prices went off alert, triggering a wave of forced liquidations that precipitated the crash.
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Traders work during the opening bell at the New York Stock Exchange. (Johannes Eisele/AFP via Getty Images/Getty Images)
“The crypto market reacted in a more rapid way than the stock market because it is 24/7.” Duckett said. “You’ll see the stock market react poorly. The crypto market has reacted more violently.”
“Many cryptocurrencies have declined in value over the past 24 hours, primarily due to market news as well as the impact of said news on people trading in the crypto markets,” Duckett reported.
The practice of borrowing to increase risk was a major driver of the losses, he said.
“People can borrow against what they have and essentially get huge leverage in crypto, up to 100x, which is a huge amount of money,” Duckett said.
“And so when those positions are liquidated out, there’s a big move either to the upside or downside. In this case, to the downside.”
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The number of people around the world holding at least $1 million worth of cryptocurrency has grown in the past year. (iStock/iStock)
The sudden stoppage of these leveraged trades caused a chain reaction. “This essentially led to rapid liquidations,” Duckett said.
Still, there are early signs that the market may be stabilizing. “It looks like it’s basically plateaued,” Duckett said. “Right now, we’re kind of in a stable state again. Tomorrow is a new day.”
“We’ve had a full day of news like this that impacted the market and led to an initial quick reaction to a recovery, to stabilization. It all essentially depends on the new news tomorrow,” Duckett said.
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“The number one rule is not to invest more than you can afford to lose – but this is not specific to crypto, this is investing in general. Additionally, researching what one is investing in is also an important part of this.”
