Cryptocurrency Market Overview

The cryptocurrency market experienced a major deleveraging event over the past 24 hours, with altcoins bearing the brunt of the selloff and total liquidations reaching levels not seen in years.

Altcoin Market Activity

According to K33 Research, the open interest of altcoins relative to the total altcoin market cap surged from 3.57% to 4.42% on Monday, leading to soaring funding rates. However, this leverage buildup unraveled sharply, falling back to 3.96% after cascading liquidations triggered a widespread selloff.

K33 Head of Research Vetle Lunde stated, "Yesterday's altcoin leverage wipeout was potentially the largest daily long liquidation event since May 19, 2021. Liquidations saw altcoin leverage fall by $12.8 billion, the largest daily reduction in altcoin open interest ever." Lunde noted that cascading liquidations were a frequent feature of the 2021 bull market and are seemingly returning as we approach the end of 2024.

Major Altcoin Performance

Major altcoins, including ether, solana, and cardano, suffered sharp declines over the past 24 hours, falling 5%, 6%, and 11%, respectively. The market-wide drop resulted in significant liquidations, totaling $1.58 billion, with $1.39 billion attributed to long liquidations. Ether alone saw over $200 million in liquidations, while bitcoin recorded $135 million but rebounded quickly, finding support near the $95,000 level before consolidating around $97,000.

Funding Rates and Future Outlook

Ether's open-interest-weighted futures funding rate has fallen from 0.0229% to 0.0091%—a multi-week low. CryptoQuant analysts noted that this decline parallels conditions from January 2024, when ether rallied before a pullback.

Bitfinex analysts noted that falling funding rates signal the removal of leverage, potentially leading to healthier price action. They stated, "If funding rates decline further, it would signal that excessive long leverage is starting to unwind, potentially leading to a more balanced market."

ETF Inflows Supporting Market Sentiment

As Bitcoin consolidates above $100,000, the mid-term outlook remains bullish, particularly if ETF inflows continue. Analysts have noted that funding rates across altcoins have stabilized to more sustainable levels, with annualized rates below 30% for altcoins and under 15% for bitcoin and ether, levels typical during bull markets.

Despite the recent market dip, analysts remain optimistic about the mid-term outlook for bitcoin and ether, citing continuing inflows into spot Bitcoin and Ethereum ETFs, which have shown eight consecutive days of net inflows. Last week, crypto investment products recorded their largest-ever weekly inflows, exceeding $3.85 billion, bringing year-to-date net inflows to $41 billion and total assets under management to a record high of over $165 billion.