Bitcoin and the general cryptocurrency market continue to struggle as prices plunged this weekend. On Friday, January 31, the cryptocurrency markets appeared to be gearing up for another slow weekend, with prices stabilizing somewhat after Thursday’s carnage.
But the market went completely against the trend this weekend, with Bitcoin and other large digital assets falling by nearly double digits on Saturday. Let’s take a look at the reasons for this sharp decline and the immediate outlook for cryptocurrency prices.
Why Bitcoin and Cryptocurrency Prices Dropped This Weekend
Since Bitcoin first fell to $81,000, a variety of reasons have swirled, from geopolitical tensions to the FOMC’s decision to leave interest rates unchanged. But the continued decline in prices even on a typically slow weekend suggests other factors are at play.
Prominent financial market commentator The Kobeissi Letter weighs in on the possible reasons behind the recent market-wide slump in a new post on social media platform X. Looking at cryptocurrency flow data can shed more light on this market conundrum, according to the report.
According to The Kobeissi Letter, the recent price decline of the world’s largest cryptocurrency by market capitalization is a situation of complete liquidity. As can be seen in the highlighted chart, Bitcoin has witnessed three well-defined liquidation waves over the past day totaling over $1.3 billion.
Source: @KobeissiLetter on X
The financial market commentator also noted that cryptocurrency market liquidity has been choppy at best recently. However, continued extreme levels of leverage in the Bitcoin market have created “air pockets” in the price.
The Kobeissi letter added:
When combined with herd-like sentiment constantly shifting from extreme bullishness to extreme bearishness, the swings become more aggressive.
Naturally, the market was hit by one of the largest liquidation events in cryptocurrency history due to a market-wide price correction. According to market data, approximately $2.5 billion worth of leveraged buys were liquidated from digital asset markets in the last 24 hours, making it the 10th largest cryptocurrency liquidation event of all time.
What’s even more notable is that last Saturday, as the price of Bitcoin fell to around $76,000, $1 billion worth of leveraged long positions were forced to close within five minutes.
Total cryptocurrency market cap decreased by 7%
At the time of this writing, the overall cryptocurrency market cap is around $2.725 trillion, down nearly 7% in the last 24 hours.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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