XRP, Dogecoin Dive 12% as Altcoin Carnage Leads to Highest Bullish Liquidation in Nearly 3 Years

Major tokens and midcaps experienced a significant drop during early Asian hours on Tuesday, with some registering one of their worst days in recent months.

XRP, dogecoin (DOGE), and Cardano's ADA declined by up to 15% over the past 24 hours. The selling pressure intensified in late U.S. hours and continued in early Asian time.

Bitcoin (BTC) declined by 3%, while ether (ETH) and Solana's SOL fell by 7%. Tron's TRX reversed most of its recent gains, losing 17%.

The overall market capitalization dropped by 6.5%, marking its largest decline since October. The CoinDesk 20 (CD20) index declined by 7%.

While no clear reason has emerged for the selling pressure, it coincides with the announcement by Google of benchmark tests on its new Willow quantum computing chip. This announcement has raised concerns about the potential implications for cryptocurrency privacy and wallet security.

Market analysts and traders had previously warned of potential short-term selling pressure due to an overheated market following a November rally. As CoinDesk reported, over $1.5 billion in longs, or bullish bets, were liquidated, the highest figure since 2021.

Altcoin futures tracked under "Others" by CoinGlass led the market losses, accounting for $560 million. Dogecoin and XRP futures lost more than $70 million each.

Some market observers noted that the selling pressure originated from U.S.-listed Coinbase, with XRP showing an unusual market impact. Metrics indicate that traders may have been over-leveraged.

"Something absolutely strange happened," said @ltrd_, a widely followed quant trader. "We witnessed a cascade of big sell orders that caused the market to drop by over 5%. We don't know exactly what happened, but it's certainly unusual."

"You can see that those sell orders are not normal...Perhaps a major player was forced to sell," they added.

Liquidations occur when an exchange forcibly closes a trader's leveraged position due to insufficient margin. Large-scale liquidations can indicate market extremes, such as panic selling or buying. A cascade of liquidations may suggest a market turning point, with a potential price reversal due to an overreaction in market sentiment.