A widespread downturn in the cryptocurrency sphere resulted in over $1.1 billion in liquidations on Thursday, impacting a wide array of digital assets. Analytics firm Glassnode suggested that bitcoin may be showing signs of weakening.
Analysts at Glassnode observed, “Bitcoin is experiencing a correction after the rally spurred by the Federal Open Market Committee (FOMC) meeting. This resembles a ‘buy the rumor, sell the news’ pattern, with a weakening market structure overall.”
The price of Bitcoin declined below $109,000 on Thursday, marking the first time this has occurred since late August. As of Friday morning, its value has decreased by approximately 6% over the past week and more than 11% from its all-time high of $124,128 on August 4th, as previously reported by Sherwood News. Despite this recent dip, Bitcoin remains approximately 67% higher than its value of around $65,000 a year ago.
Lee Bratcher, President and Co-founder of the Texas Blockchain Council, explained to Sherwood News that the sell-off is primarily driven by excessive leverage.
“Many traders held significantly leveraged long positions. When Bitcoin fell below critical support levels, these positions began to be liquidated. This forced selling by exchanges created a cascading effect, with each wave of liquidations pushing prices further down and triggering subsequent margin calls,” Bratcher stated.
Bratcher noted that inflows and outflows from Exchange Traded Funds (ETFs) exacerbated the situation, given their substantial role in facilitating institutional investment.
Bitcoin ETFs experienced outflows totaling $258.4 million on Thursday, with BlackRock’s iShares Bitcoin Trust being the sole exception, registering inflows. Data from SoSoValue indicates that Bitcoin ETFs have seen outflows of $725 million since Monday.
“What we’re observing is a textbook long squeeze: overextended positions, ETF capital leaving the space, and macroeconomic conditions combining to create a sharp, mutually reinforcing downward trend,” Bratcher commented.
He emphasized the importance of monitoring ETF movements, open interest in derivative contracts, and whether Bitcoin can maintain its value above crucial support thresholds.
“Failure to do so could trigger another round of liquidations,” he cautioned.