The cryptocurrency market has suffered a massive loss, with $900m wiped out in the last 24 hours, data from Coinglass on Monday showed.
Long positions accounted for $764m of the liquidations, while short positions made up $124m, according to the report.
The liquidations highlighted the risks traders face when trading on unregulated Bitcoin derivative exchanges, where positions can be aggressively closed by the exchange’s risk engine when they reach the liquidation price.
According to the report, while a small number of liquidations may have a limited impact on the market, the simultaneous liquidation of thousands of positions can significantly move prices, triggering a “cascading effect” that may liquidate additional surrounding positions.
Meanwhile, Bitcoin’s price took a further hit on Monday morning, dipping to $53,000 on Binance, its lowest level since late February this year.
Coinglass noted that the cryptocurrency’s decline is attributed to a combination of factors, including uncertainty in the US economy, investor withdrawals, and increased market turbulence.
Crypto investment analyst Okoro Nnamdi shared his insights on the current state of Bitcoin, citing a highly anticipated liquidation due to the formation of a “cup and handle” pattern in technical analysis.
The cup and handle pattern indicate a potential breakout to the upside, as the price is expected to rise above the resistance level formed by the top of the cup.
“The liquidation is highly expected because Bitcoin is building what we call in technical analysis a ‘cup and handle’ formation. However, it is trying to close the CME (Chicago Mercantile Exchange) gap—a price gap on the CME Bitcoin futures chart—and consolidate for about two months before flashing a warning sign of a potential upside move,” Nnamdi told The PUNCH.
Despite the expected liquidation, Nnamdi remained optimistic about Bitcoin’s long-term prospects, setting a target price of $150,000 for the cryptocurrency going into 2025.
“Overall, my target in Bitcoin going into 2025 is $150,000. The institutions are using this opportunity to accumulate the deep,” he added.
A blockchain expert and team lead at SIRFITECH, Adewale Kayode, told The PUNCH that the downturn began a few days ago when the Bank of Japan increased its interest rate from 0 per cent to 0.25 per cent for the first time in 30 years.
Kayode explained that investors globally had been borrowing from the BOJ at 0 per cent interest to invest in riskier assets, such as research, stocks, and loans.
However, with the rate hike, investors were fearful of a potential series of rate increases and are hastily returning their loans to the BOJ, leading to a massive capital outflow, he explained.