Total crypto market capitalization slid to $900 billion from over $1 trillion on Wednesday morning as traders reacted to speculations around prominent exchange FTXrs liquidity issues. Over $700 million in long positions, or bets for higher prices, was liquidated in the past 24 hours as traders were caught on the wrong footing.

Bitcoin (BTC) and ether (ETH) each declined more than 8% in the past 24 hours to reach levels previously seen in October 2020, putting a gradual recovery on hold. Other crypto majors like XRP, dogecoin (DOGE) and cardano (ADA) slipped over 12%, while solana (SOL) n of which Sam Bankman-Fried is a prominent backer n dropped 25%.

Futures tracking bitcoin and ether saw a cumulative $390 million loss due to liquidations, while SOL futures saw $40 million liquidated. FTT futures had a relatively lesser $27 million in liquidations n implying the steep drop was mostly driven by sales of spot tokens.

Liquidations on crypto futures in the past 24 hours (Coinglass)

Liquidation refers to when an exchange forcefully closes a traderrs leveraged position because of a partial or total loss of the traderrs initial margin. It happens when a trader cannot meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).

FTX came under scrutiny following a CoinDesk report last week that found the balance sheet of Alameda Research, a crypto trading unit owned by Sam Bankman-Fried, who also owns FTX, was full of FTXrs native FTT tokens. This meant that Alameda rested on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto.

The report sparked rumors of FTX becoming possibly insolvent, which in turn led to industry players selling FTX-linked coins to protect their own downside. Rival Binance, which held over $500 million of FTT on its books, started to offload its holdings n which culminated in a 24-hour-long drama that ended with Binance signing an intent to acquire FTX, which is now considered by many to be insolvent.

Such market dynamics spooked crypto markets as traders reacted to possible contagion risks. FTT prices slid 70% to reach levels previously seen in mid-2021.