Yesterday’s movement in the crypto markets was not a real crash, but it was enough to trigger a huge amount of forced liquidations.
Technically it was only a temporary correction following a strong and fast rebound.
The rise of the crypto market before the liquidations that led to yesterday’s crash
Everything actually started on Monday, when the price of Bitcoin rose above $65,000 for the first time since November 2021, the month of the previous all-time high.
Indeed, that climb had already brought the price of BTC above $68,000, very close to the previous historical highs.
During the night it actually temporarily dropped below $66,000, probably due to profit-taking in Asian markets, but with the reopening of US markets yesterday it jumped above $69,000 in just a few hours, setting a new all-time high.
However, it is necessary to specify that the euphoria and FOMO that caused this increase began to spread in the crypto markets as early as February 26, when Bitcoin surged past $52,000.
All this must be framed in a real bullrun that started in October of last year, when the price of Bitcoin first rose above $30,000 and then above $35,000.
Although we cannot yet speak of a major bull run similar to those of the post-halving years (2013, 2017, and 2021), it is evident that this is indeed a bull run thanks to which BTC has returned to its highs.
Profit taking
Already in the night between Monday and Tuesday, Asian markets had started to take profit from the very high prices of Bitcoin, but American markets only started to take profit yesterday after the new high.
Indeed, as soon as the price of Bitcoin rose above $69,000, sales were triggered, bringing it down to even below $60,000 in just a few hours.
One important thing, however, is that there were no profit-taking on the Asian markets tonight, indicating that probably most of them had already been exhausted the day before, and probably there might not be any on the American markets today.
All this has indeed led to a brief “collapse” from over $69,000 to less than $60,000, but only to bounce back almost immediately to $65,000. Later, the price then rose above $67,000 during the night, probably thanks to the Asian markets that had sold the day before to monetize their gains.
So in the end it wasn’t a crash, but a correction from $69,000 to $66,000, not forgetting that two days ago the price was still at $62,000.
Speaking of a “collapse” in such a scenario actually seems quite incorrect, despite there being a +13% increase in five hours.
Settlements following the crypto crash
But the most curious thing is that such a dynamic yesterday produced forced liquidations of both short positions before and long positions after.
Indeed, the rise from $62,000 to $69,000 in just over 24 hours has liquidated many short positions of those who were betting on a correction, but then the correction has liquidated many long positions of those who were betting on the continuation of the rally.
In the end, the price actually went from $62,000 on Monday to $66,000 today, but through a quick rise up to $69,000 and a very rapid correction down to $60,000.
It was precisely these two very fast events that left no escape for short sellers and “longists”, as many did not have time to close or modify their positions.
In these cases forced liquidations are triggered, even if everything then turns out to be a flash in the pan.
According to the Coinglass data, in just one day yesterday, almost 300 million dollars of short positions were liquidated first, and then almost 900 million dollars of long positions.
Altogether, nearly 1.2 billion dollars have been liquidated on leveraged cryptocurrency futures markets.
If short liquidations were not a record, long liquidations were, as in recent months we had never seen anything like it.
The return to normality
It was actually a “great cleaning”, although only in the short term, which may have brought the situation back to an apparent normality.
To tell the truth, this 2024 for the crypto market is anything but normal. In fact, never before had the price of Bitcoin reached a new all-time high just before the halving, because in the three previous cases the new highs had always been reached months after the halving.
However, we must begin to get used to a new normality, because with the arrival of BTC spot ETFs on US exchanges, the basic structure of the Bitcoin market has changed.
It is possible that yesterday’s big clean-up brought the Bitcoin market back to the new normal, so much so that today it may almost seem like nothing sensational has happened, if one were to limit oneself to analyzing what is happening now.
The FOMO
The fact is that even the FOMO of recent days now seems to be dissolving.
By analyzing, in fact, the graph of searches for the word “bitcoin” on Google in the last seven days it is discovered that the peak was on February 28th, while yesterday we stopped at 80% of the peak at the end of February.
Furthermore, the same peak on February 28th turned out to be only slightly higher than that of January 11th, and not at the record levels of November 2021, or for example those of June 2022.
Actually, the current level is similar to yesterday at this time, so it cannot be ruled out that with the reopening of the US stock exchanges it could peak again, but the sentiment dropped to more physiological levels would suggest otherwise.
It remains to be seen whether the US markets will continue to be bullish, as they have been for months now, or if in case of a new rise to new highs, a correction for further profit-taking could occur again, perhaps starting from $70,000.