Bitcoin plummeted to $77,000, but leveraged traders who were betting it wouldn’t do so didn’t have a good time. Over $526 million in crypto positions were liquidated in just one hour, the majority of which were long positions.
what happened
Bitcoin was testing the $79,000 to $80,000 resistance zone but was unable to break out. When this rejection fell below $77,000, a series of forced liquidations began across major exchanges.
For the uninitiated, a liquidation is what happens when a leveraged trader’s position moves so much that the exchange automatically closes the position to prevent further losses.
The $526 million figure represents the damage caused in one hour. But the widespread weekend volatility event was even uglier, with some reports saying total long-term liquidations could exceed $800 million. More than $300 million in liquidations were recorded across major exchanges as Bitcoin fell below the $77,000 level.
The settings that made this a pain
Leading up to this pullback, Bitcoin had enjoyed nine consecutive days of ETF inflows, totaling approximately $2.12 billion. Sustained institutional buying like this tends to encourage leveraged traders, who accumulate long positions in hopes that the momentum will continue.
The short-term support zone is currently in the $75,000 to $77,000 range.
The leverage problem will never go away
Spot Bitcoin ETFs have introduced a new class of investors who are unleveraged and not subject to liquidation. This $2.12 billion in ETF inflows represents real buying, not leveraged speculation.
The bulls need to protect the $75,000 to $77,000 zone. What they need to get back is in the $79,000 to $80,000 range.
ETF flow data will be more important than usual over the next few days. Nine consecutive days of capital inflows created the conditions for the latest rally.
