Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin experienced a significant price drop on Thursday, falling 3.5% to $107,500, primarily due to an aggressive wave of short selling that added over $1 billion in bearish bets to the market. This sharp decline triggered approximately $724 million in liquidations across the cryptocurrency market, with long positions accounting for the majority of the losses at 74%.
Market Dynamics and Liquidation Event
The initial phase of the drop saw Bitcoin slide 1.5% from $115,000, accompanied by a 2.3% increase in open interest, adding over $591 million in notional value to derivative contracts. Data from Velo indicated that perpetual futures on offshore exchanges like Binance and Bybit saw a decrease in cumulative volume delta, while spot cumulative volume delta remained stable, suggesting that short perpetual sellers were the primary drivers of the decline.
As short selling intensified, Bitcoin’s price dropped further to $107,500. Open interest subsequently climbed another 4%, adding $1.03 billion in exposure as spot sellers also began to participate in the sell-off. Julio Moreno, head of research at CryptoQuant, noted that “Short traders are dominating in the perpetual futures markets right now, and spot demand is still in contraction based on on-chain data.”
Amidst the derivatives-led downturn, a divergence was observed on the U.S.-based exchange Coinbase, where spot cumulative volume delta remained “mostly positive.” This indicated consistent “buy-the-dip” activity from spot investors. CoinGlass data further confirmed an increase in bid activity, suggesting that spot buyers were absorbing the selling pressure from leveraged shorts.
Analyst Perspectives and Future Outlook
The recent price volatility led to a substantial $724 million liquidation event within 24 hours. Long positions bore the brunt of this, with $536 million wiped out, suggesting that many bulls had utilized high leverage in anticipation of a recovery.
Thiago Duarte, a Market Analyst at Axi, characterized the event as a “structural flaw magnified by excessive leverage and thin liquidity.” Similarly, Ryan Lee, chief analyst at Bitget, attributed the drop to a combination of “macroeconomic uncertainty, rising geopolitical tensions, and a spike in liquidations from overleveraged positions.” Lee also noted that the recovery following a previous “Black Friday” event was met with profit-taking, adding to the selling pressure.
Looking ahead, Anthony Leutenegger, CEO of Aragon, suggested that the crypto market will likely require “time to rebalance or find its footing after such a big flush-out.” He added that “As long as macro uncertainty lingers… we might expect continued volatility.” Despite the observed dip-buying from spot investors, Moreno maintained a bearish outlook, stating that the “odds of a rally are tilted to the downside.”
