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A $245M Bitcoin liquidation event has triggered significant volatility, and a drop in open interest.
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Bitcoin’s open interest, and the number of options traded, increased despite the recent sell-off.
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The event highlighted the risks of excessive leverage on the crypto market. Traders reassessed market conditions.
A new analysis by CryptoQuant shows that a major Bitcoin liquidation event erased around $245.3 millions when Bitcoin reached $89,700. This event also led to a significant drop in open interest.
The rapid sell-off caused increased volatility and forced traders to reassess the market conditions, as Bitcoin formed a new possible support level. This event highlights the dangers of using too much leverage on the crypto market.
Long squeezes can lead to cascading sales, where prices are pushed lower by forced liquidations.
How the Bitcoin Long Squeeze unfolded
Amr Taha, CryptoQuant’s Amr, explains that a long squeeze occurs when holders of long positions are forced to sell their long positions as prices fall.
This will start automatic liquidations and accelerate a quick sell-off. Bitcoin’s drop below $89K led to a lot of liquidations and removed liquidity from the market.
Whales and Market Makers Step in
As liquidation engines closed their positions, large orders from whales or market makers took the pressure off. According to Taha this high-volume liquidity usually levels out the prices as institutional investors take advantage of the opportunity to buy assets at lower price.
Also, he said that market makers often use liquidation zones to make limit orders at good price.
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Bitcoin Derivative Market Data
In the last 24 hours, $226.72 millions was liquidated by crypto traders. Of that amount, $177.52 came from long positions. The largest liquidation occurred in one hour, reaching $657.28K. Short traders accounted for $630.62K. This shows the market’s continued volatility.
Bitcoin’s open-interest (OI) has increased by 0.69% despite the liquidation to $57.09 billion. This increase from more than $60 billion before the liquidation event indicates that traders are still holding leveraged positions.
Options open interest increased by 3.33%, to $32.50 Billion, indicating a continued interest in BTC option contracts.
Bitcoin’s derivatives volume fell by 18.57%, to $125.73 Billion, while the volume of options traded fell by 7.12%, to $4.14 Billion.
Funding rates and Long/Short ratios Signal Sentiment
The BTC OI weighted funding rate is slightly positive, reflecting neutral to bullish sentiment. Funding rates on major exchanges like Binance, Bybit and OKX are between 0.0010% to 0.0100%. This indicates that traders remain optimistic about Bitcoin’s recovery.
Binance’s long/short ratios are also still high, at 2.5423 versus OKX’s 2.91. This shows that traders are still betting on an upward price movement, despite recent long liquidations.
Related to Bitcoin Price Prediction: $90K break – Dip or Rebound next?
What’s next for Bitcoin?
Conclusion: While the increase in open interest indicates that traders are maintaining leverage, the decline of trading volume may indicate a possible reduction in speculation. If traders continue to use too much leverage, there is a high risk of further liquidation waves.
Bitcoin is currently trading at $88,763, a 0.3% drop over the last 24 hours. This brings its weekly loss up to 7.1%.
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