The Wild Ride of Cryptocurrencies: A Roller Coaster Journey of Bitcoin, Ethereum, and Beyond
Bitcoin Hits a New Peak – But at What Cost?
Just as the cryptocurrency market was beginning to show signs of stabilization, Bitcoin took center stage and threw a wild party. The leading digital asset reached an unprecedented peak of $73,050 on March 12, only to dip below the $70,000 mark hours later. The roller coaster ride left investors in a state of shock and led to an astonishing $361 million worth of leveraged trades being liquidated within a mere 24 hours.
Long and Short Position Holders Face Wipeouts
This wasn’t just an ordinary day in the cryptocurrency market; it was a day where long position holders, who had been betting on the price to soar, faced a massive $258 million wipeout. Short sellers, those skeptics betting against the rise, did not go unscathed either, losing over $103 million.
A Whirlwind of Liquidations
The market witnessed the most significant flush-out of long positions since March 5, when Bitcoin took a tumble to $60,800 after setting its previous all-time high. Although the volatility wasn’t as heart-stopping this time around, with Bitcoin’s price swinging by a “mere” 4.85%, the market was far from calm.
Anticipating Price Corrections and FOMO
A spokesperson from 10x Research commented on the situation, suggesting that traders could be growing jittery, anticipating a price correction. Fear Of Missing Out (FOMO) is also prevalent, hinting at the possibility of the rally picking up steam once again. Over the weekend, futures open interest saw a 5% increase as traders braced themselves for a bumpy ride with tight stops to avoid getting caught up in the whirlwind.
The Most Liquidated Cryptocurrencies
Bitcoin and Ethereum led the way in liquidations, with Solana, Dogecoin, and meme-fueled Ordi also joining the fray. The most action happened on the crypto exchange OKX, which saw a total of $152 million evaporate into thin air, closely followed by Binance traders who waved goodbye to $128.4 million.
The Bigger Picture: Institutional Inflows and the Potential Sell-Side Liquidity Crisis
Let’s take a step back for a moment. Short sellers have had a challenging year, with losses amounting to over $6 billion as they tried to bet against crypto firms. Bitcoin itself has been on a tear, rallying 130% to a comfortable $37,800 during the same period. However, Ki Young Ju, founder of CryptoQuant, warns of a potential “sell-side liquidity crisis” by September if institutional inflows continue at their current pace.
Institutional Investment in Bitcoin and Ethereum
Bitcoin is no longer just a toy for the average person; it’s becoming an essential component of institutional investment portfolios. Spot Bitcoin ETFs are hoarding BTC like there’s no tomorrow, making history with nearly $30 billion in assets under management. Ki Young Ju points out that last week alone, these ETFs locked away over 30,000 BTC. This could result in a demand-supply imbalance, potentially leading to a price explosion beyond our wildest dreams.
Grayscale Bitcoin Trust (GBTC) and the Dollar Value
Despite daily outflows hitting an all-time high, GBTC’s dollar value remains robust due to Bitcoin’s upward trajectory. This scenario paints a picture of a significant decrease in GBTC’s Bitcoin holdings, yet the value remains strong as investors continue to pour money into Bitcoin.
A Potential Supply Crunch and Soaring Prices
Ki Young Ju speculates that if this trend continues, we might witness a supply crunch that could send Bitcoin’s price to stratospheric levels. This theory is backed by the consistent increase in BTC held by accumulation addresses, indicating a growing number of investors stockpiling Bitcoin in anticipation of the sell-side liquidity crisis.
