After flirting with a $2 trillion market cap for the last couple of days, the cryptocurrency market took a 7% hit on April 7, dropping the total crypto market cap to $1.8 trillion. As the unexpected sell-off took place, investors scrambled to find a reason to explain the move.
Analysts typically identify the use of excessive leverage as the prime suspect as this usually occurs as the market reaches an all-time high and traders get greedy, but this is an easy conclusion to reach.
The actual cause could be near impossible to determine. Still, a starting place is looking at how high buyers’ leverage was compared to the previous weeks. Analysts must also question whether a $1 billion liquidation is even significant in the current bullish environment.
Leverage amplifies price movements on both sidesTotal cryptocurrency market capitalization. Source: TradingView
The negative price swing on April 7 resembles the rally that took place two days earlier. However, retail traders deploy leverage by using