The price of Bitcoin (BTC) fell more than 17% in the past 24 hours as the futures market saw massive sell-offs across the board.
Liquidations occur when leveraged futures positions drop to a certain thresholdFor example, a position with 10x leverage would liquidate or become worthless if the price of BTC fell 5%.
What started the massive bitcoin sell-off festival?
When the bitcoin futures market is severely congested and overcrowded, A small price movement can lead to massive sell-offs.
According to analysts at Santiment, a data analytics company, One address was responsible for the second largest Bitcoin transaction of the yearas reported by Cointelegraph.
More than 2,700 BTC were transferred just before the crashthat was greater than the inflow of 2,000 BTC before the March 2020 crash when Bitcoin fell below $ 4,000. According to Analysts::
“As we discovered yesterday, there was an 11-fold entry rally that initiated the #Bitcoin price correction of $ 58.3,000 on ATH. Analysis of the data revealed that one direction was responsible for the second largest BTC transaction of the year , an import of 2,700 tokens into the wallet before a quick sale. The same address made a transfer of 2,000 BTC in March last year, exactly as it took place. The correction on Black Thursday. In total, it has 73 transactions in its year of existence z A total of $ 91,935 for BTC was imported, with all tokens moving within minutes of arrival. “
It is possible that A significant sale on the spot market has created strong selling pressure on the futures market by liquidating many long positions.
When Bitcoin started correcting itself on February 22nd, The dominant funding rate for cryptocurrency futures was 0.15%, though it continued to decline.
This trend showed two things: Excessive leverage buyers bought aggressively on each dip and the market remained overheated even as the pullback occurred.
As a result, During the short term downtrend, new buyers were continuously liquidatedand ignites a brutal cycle of cascading liquidations.
However, a trader known as the “Byzantine General” described him as a “coordinated reorganization” and said it was a healthy trend.
If Bitcoin were to encounter something called a “Black Swan” message or anomaly, it would be a cause for concern. However, the trader pointed to relatively large buy orders to show buyers are waiting to intervene in the fall. He said:
“I’m happy to see signs that this is a coordinated move as it implies that BTC is still bullish and the big players just want their offerings to be filled. If it wasn’t deliberate it would be a lot more frightening . “
Short term, It is important for Bitcoin to defend the $ 45,000 support area to ensure the short-term cycle does not get into the “bear zone”.At the bottom, the likelihood of a deeper and longer correction increases rapidly.