The cryptocurrency market experienced a significant downturn on Tuesday evening, leading to a rapid and extensive wave of liquidations that sent shockwaves through the digital asset space.

What Happened: Bitcoin, often referred to as “King Crypto,” saw a dramatic fall, plunging below the $59,000 mark. This level was last observed on August 19, making it a notable low after the cryptocurrency had earlier surpassed $63,000 in the same day.

Ethereum, the second-largest cryptocurrency by market capitalization, faced an even steeper decline. It dropped to an intraday low of $2,400, a price point it hadn’t touched in nearly three weeks. This sharp descent underscores the volatility and heightened risk in the cryptocurrency markets.

In just four hours, over $207 million was wiped out from the market, contributing to a total of $315 million in liquidations over the past 24 hours. Notably, nearly $283 million in leveraged long positions were eradicated, marking the highest level of such liquidations since the market turbulence on August 5.

Bitcoin’s Open Interest, a measure of the total number of outstanding derivative contracts that have not been settled, fell by 7.68% over the last 24 hours. This decline highlights the extensive liquidation of long positions and suggests a broader impact on trader sentiment.

The Cryptocurrency Fear & Greed Index, an indicator that gauges market sentiment, flashed “Fear” at the time of writing. This signal points to considerable selling pressure and a cautious mood among investors.

Top Gainers (24-Hours): Despite the market turmoil, there were still some cryptocurrencies that managed to perform well. The global cryptocurrency market cap stood at $2.07 trillion, having contracted by 5.93% over the past day.

Contrastingly, traditional stock markets fared better on Tuesday. The S&P 500 index gained 8.96 points (0.16%) to close at 5,625.80. The Nasdaq Composite also added 0.16%, ending at 17,754.82, while the Dow Jones Industrial Average rose by 0.02% to close at 17,754.82, marking its second consecutive record close.

This stock market rally occurred ahead of the eagerly awaited second-quarter earnings report from NVIDIA Corp. (NVDA), a leading player in AI technology. Shares of Nvidia increased by 1.46% on Tuesday, reflecting positive investor sentiment towards the tech and AI sector.

Analyst Notes: Renowned analytics firm Santiment attributed the latest retracement in the cryptocurrency market to extreme funding rates on derivatives exchanges such as dYdX. The firm highlighted a surge in over-leveraged long positions on August 25, which set off a downward trend in the market.

According to Santiment, “When funding rates get extreme in either direction, they are always prone to get liquidated and push markets in the opposite direction.” The firm advised investors to wait for funding rates to stabilize before regaining optimism.

Additionally, widely-followed cryptocurrency analyst Rekt Capital interpreted Bitcoin’s recent movements as a post-breakout retest of its downtrending channel. The analyst noted that a successful retest of the channel’s top would confirm the breakout and likely precede further upward movement.

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