Bitcoin: A Liquidation Risk Of 1.38 Billion Dollars

The Bitcoin market, still plagued by unpredictable volatility, is currently under the threat of a massive liquidation. If Bitcoin rebounds to $71,000, a colossal sum of $1.38 billion in short positions could be wiped out. This phenomenon, a result of recent price fluctuations, highlights the inherent risks in cryptocurrency markets.

Impact of economic reports on Bitcoin

In the two days preceding the slight drop, Bitcoin traded between $70,000 and $71,662. Optimism reigned among traders, some hoping to see the cryptocurrency approach its all-time high of $73,679.

However, this idyllic situation quickly deteriorated. On June 7th, Bitcoin fell by 3.33%, dropping from $69,427 to $68,507, before slightly stabilizing above the crucial $69,000 threshold. This plunge occurred amid deep macroeconomic uncertainty, exacerbated by the U.S. jobs report.

The U.S. jobs report, revealing better-than-expected job growth in May, surprised investors and disrupted markets. This news raised concerns about the future monetary policy of the Federal Reserve, leading to significant movements in financial markets. The Bitcoin market’s reaction to this economic data was immediate and severe.

In parallel with Bitcoin’s drop, other major cryptocurrencies also suffered. Ether saw its price drop by 3.58%, while altcoins like Solana and Dogecoin recorded respective drops of 5.61% and 8.70%.

According to data from CoinGlass, this rout led to a liquidation of $409.51 million in long and short positions, including $56.71 million in long Bitcoin positions.

Traders bet on the decline

In the face of this situation, traders seem increasingly skeptical about a quick rebound in Bitcoin. The dominance of short positions shows an anticipation of further price drops. If Bitcoin hits $71,000 again, $1.38 billion in short positions would be liquidated, illustrating growing mistrust among futures traders.

Investors are wondering why Bitcoin prices haven’t recently surpassed their March highs, especially considering the series of 19 consecutive days of positive inflows into Bitcoin exchange-traded funds (ETFs). These inflows, while significant, have not been sufficient to offset sales in the broader ecosystem.

The complexity of the Bitcoin market cannot be underestimated. As Charles Edwards, founder of Capriole Investments, noted, ETF inflows, while encouraging, are not strong enough to outpace overall sales. Additionally, crypto trader Christopher Inks reminded that the market consists not only of spot transactions but also futures, ETFs, and options, each having a distinct influence on Bitcoin’s price.

This context highlights the complexity and fragility of the crypto market. Investors and traders must navigate an environment where economic data, central bank decisions, and market dynamics interact in complex and sometimes unpredictable ways.