The price of Bitcoin (BTC) has fallen over 17% in the past 24 hours as the futures market has seen massive sell-offs across the board.
Closeouts occur when leveraged futures positions fall to a certain threshold. For example, a position using 10x leverage would be liquidated or become worthless if the price of BTC fell by 5%.
What sparked Bitcoin’s mass liquidation festival?
If the Bitcoin futures market is severely over-leveraged and overcrowded, a slight price movement can trigger massive sell-offs.
According to analysts at Santiment, a data analytics company, one address was responsible for the second largest Bitcoin transaction of the year, as TBEN reported.
More than 2,700 BTC was transferred just before the decline, which was higher than the 2,000 BTC inflow seen before the March 2020 crash when Bitcoin fell below $ 4,000. Analysts mentionned:
As we noted yesterday, there was an 11x currency surge that initiated the price correction of # Bitcoin from its #ATH of $ 58.3k. Other data revealed that ‘one address was responsible for the second largest $ BTC transaction of the year, an import of $ 2,700 tokens into the wallet before a quick sale. This same address also performed an import of $ 2,000 BTC last March around the same time. where the Black Thursday correction took place. In total, she made 73 transactions in one year, for a total of $ 91,935 BTC imported, all tokens moving away within minutes of arriving. “
It is possible that a massive sell off in the spot market caused the futures market to see intense selling pressure due to the liquidation of many long positions.
When Bitcoin started correcting on February 22, the dominant cryptocurrency’s term funding rate hovered around 0.15% even as it continued to decline.
This trend showed two things: Over-leveraged buyers were aggressively buying every trough and the market remained overheated even when the pullback occurred.
As a result, new buyers during the short-term downtrend were permanently liquidated, triggering a brutal cycle of cascading sell-offs.
However, a pseudonymous trader known as “Byzantine General” described it as a “coordinated shakeout” and said it was a healthy trend.
If Bitcoin stumbled upon so-called ‘black swan’ news or an anomaly, that would be cause for concern. But the trader highlighted the presence of relatively large buy orders to show that buyers are waiting to intervene to buy the downside. He said:
“I’m glad to see signs that this is a coordinated reshuffle as it implies that BTC is still bullish and the big players just want their offers to be fulfilled. If it wasn’t premeditated, this would be much more frightening. “
In the short term, it is essential that Bitcoin defend the $ 45,000 support zone to ensure that the short term cycle does not enter the “bearish zone”. Below that, the likelihood of a deeper and prolonged correction increases rapidly.