- A $245M Bitcoin long liquidation event triggered significant volatility and a decline in open interest.
- Despite the sell-off, Bitcoin’s open interest and options activity saw slight increases.
- The event highlights the risks of excessive leverage in the crypto market, with traders reassessing market conditions.
A new analysis from CryptoQuant shows a major Bitcoin long liquidation event erased about $245.3 million when Bitcoin hit $89,700. This event also caused a big drop in open interest.
The rapid sell-off led to increased volatility, forcing traders to reassess market conditions as Bitcoin formed a potential new support level. The event shows the dangers of too much leverage in the crypto market..
Long squeezes often lead to cascading liquidations, where forced sell-offs push prices lower, accelerating downward momentum.
How the Bitcoin Long Squeeze Unfolded
A long squeeze occurs when long-position holders are forced to sell as prices decline, CryptoQuant’s Amr Taha explained.
This starts automatic liquidations, speeding up a fast sell-off. Bitcoin’s fall below $89K resulted in lots of liquidations, removing liquidity from the market.
Whales and Market Makers Step In
As liquidation engines closed positions, large buy orders from whales and market makers absorbed the selling pressure. According to Taha, this high-volume liquidation usually levels out prices, as institutional investors use the chance to buy assets at lower prices.
Also, he added market makers often use these liquidation zones to place limit orders at good prices.
Related: Bitcoin Bull Run Cycle? Chart Points to Next Phase for BTC with Price Analysis
Bitcoin Derivative Market Data
In the past 24 hours, $226.72 million was liquidated from crypto traders, with $177.52 million coming from long positions. The largest liquidation event happened in a single hour, reaching $657.28K, with short traders making up $630.62K of that amount. This underlines the market’s ongoing volatility.
Despite the liquidation, Bitcoin’s open interest (OI) increased slightly by 0.69%, reaching $57.09 billion. This uptick from over $60 billion prior to the liquidation event suggests that traders are still maintaining leveraged positions.
Options open interest also saw growth, rising 3.33% to $32.50 billion, indicating continued interest in BTC options contracts.
However, Bitcoin’s derivatives trading volume dropped by 18.57% to $125.73 billion, while options volume fell by 7.12% to $4.14 billion.
Funding Rates and Long/Short Ratios Signal Sentiment
The BTC OI-weighted funding rate remains slightly positive, reflecting a neutral-to-bullish sentiment. Funding rates across major exchanges such as Binance, Bybit, and OKX are currently between 0.0010% and 0.0100%, suggesting that traders still have an optimistic outlook on Bitcoin’s recovery.
Moreover, the long/short ratios remain elevated, with Binance at 2.5423 and OKX at 2.91. This indicates that traders continue to bet on upward price movement despite the recent long liquidations.
Related: Bitcoin Price Prediction: $90K Break – Dip or Rebound Next?
What’s Next for Bitcoin?
In conclusion, while the rise in open interest indicates traders are keeping leverage, the decline in trading volume signals a possible reduction in speculative activity. If traders keep using too much leverage, the risk of more liquidation waves is still high.
As of the latest data, Bitcoin is trading at $88,763, marking a 0.3% decline over the past 24 hours and bringing its weekly loss to 7.1%.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
