Bitcoin’s drop below $80,000 has forced traders into a crowded leverage zone, and further declines could force roughly $1 billion of long positions out of the market.
According to crypto slate The largest cryptocurrency fell to $78,725 as higher-than-expected U.S. inflation dampened hopes that the Federal Reserve could cut interest rates this year, data showed.
At the time of writing, Bitcoin has recovered to $79,500, down about 2% since the day and about 37% below October’s record of $126,000.
This price performance leaves Bitcoin caught between two closely monitored liquidation levels. An estimated $1 billion of long positions on major exchanges could be liquidated if Bitcoin falls below $78,000, according to data from Coinglass on May 14. A rebound to around $80,458 would put around $640 million of short positions at risk.
This narrow range has become the market’s immediate battleground after inflation data hampered Bitcoin’s recovery from its April lows.
Notably, the current decline also coincides with weakening US demand signals, outflows from Bitcoin spot-traded funds, and renewed profit-taking by investors whose holdings returned to profits during the rally.
Leverage approximately $78,000 build
In a note shared with crypto slateCryptoQuant noted that BTC’s rise above $80,000 was driven by speculative demand.
As a result, the $78,000 level has gained more weight as leveraged long positions are concentrated below it.
This concentration level indicates that forced selling or buying may intensify if the price reaches that threshold. Large clusters mean the market may move faster once that zone is reached, as exchanges close positions that no longer meet margin requirements.
Coinglass’ liquidation map shows that there is more immediate downside risk. If Bitcoin falls below $78,000, the forced liquidation of long positions could increase selling pressure at the same time as spot demand is already weakening.
That could turn a normal pullback into a more rapid deleveraging move.
On the other hand, upside risks are small but still significant. A return to $80,458 would put pressure on the roughly $640 million short position and could force a buy if the bears believe they are leaning too far into an inflation-driven decline.
This tension keeps Bitcoin in a compressed range. A break below this will test whether there is enough spot demand to support April’s recovery. A recovery above $80,000 would indicate that the inflation shock has not fully recovered.
Spot Bitcoin demand slows due to rapid increase in ETF outflows
Meanwhile, Bitcoin derivatives are becoming more vulnerable as spot market signals have weakened recently.
Coinbase’s Bitcoin Premium Index has been in decline since late April, according to data from CryptoQuant. The index tracks the price difference between Coinbase and Binance and is often used as a measure of US demand.
The continued negative reading suggests that buying pressure from US-related investors has eased as Bitcoin approaches $80,000.
In this case, CryptoQuant analyst JA Maarturn explained that this signal means “US institutional investors (large companies) are selling Bitcoin.”
This is borne out by ETF flows, which have been supportive this week with more than $800 million in outflows.
The underperformance was primarily due to a net outflow of $630.38 million on May 13, according to SoSoValue data. This was the second consecutive day of withdrawals and the largest single-day outflow in three months.
Additional data from Glassnode also shows that the seven-day moving average of net flows for U.S. spot ETFs fell to -$88 million per day, the largest outflow since mid-February.
Market analysts said this trend indicates that some institutional investors used the $80,000 recovery in BTC to reduce their exposure rather than increase risk.
However, the situation is not a one-way street, as the Spot Bitcoin ETF still has over $400 million in net inflows since the beginning of the month, a sign that investor appetite has not disappeared.
However, the recent reversal shows that demand has become more selective as the rally faces macro pressures and technical resistance.
The 200-day average is the test for the top price.
Against this backdrop, Bitcoin’s immediate downside test is $78,000, the low seen in early May prior to the rally towards $82,000. A break below this level would increase the risk of a liquidation cluster and a move towards capitulation territory in late April.
Still, BTC’s main resistance lies near its 200-day moving average at $82,400. CryptoQuant data shows that Bitcoin reached that level after rising 37% from its April lows.
This situation is similar in some respects to the situation in March 2022. Bitcoin then rose about 43% before hitting its 200-day moving average, before turning downward.
A clean break above $82,400 would ease pressure on bulls and could force short sellers to reconsider their positions, the company said.
However, a failure near that zone would reinforce the view that Bitcoin’s rally has met resistance at the same time that profit-taking and ETF outflows have accelerated.
If Bitcoin falls below $78,000, the next major on-chain support will be closer to $70,000, which is close to traders’ on-chain realized price.
This level represents the average cost base for short-term traders and has historically served as a support band as unrealized gains compress towards zero.
(Tag translation) Bitcoin
