According to U.Today, the cryptocurrency market has experienced its second largest liquidation event in history, with nearly $700 million worth of long orders being wiped out overnight as Bitcoin's value fell below $55,000. This significant downturn has triggered a cascade effect, causing large-scale liquidations and inciting investor panic, which in turn has led to further price drops.
The situation has been exacerbated by panic sales, which have resulted in even more liquidations and a steeper decline in prices. This pattern is currently being observed in the market, with potentially severe consequences. The market has been under considerable selling pressure due to the transfer of funds from the now-defunct Mt. Gox exchange, which has increased the total quantity of Bitcoin available for purchase and subsequently lowered prices.
Another key factor contributing to the downturn has been the recent selling pressure from exchange-traded funds (ETFs). Despite previously accumulating Bitcoin, ETFs have now become a major source of selling pressure. When these funds offload substantial quantities of the cryptocurrency, the market price of Bitcoin is adversely affected.
The situation is further complicated by the fact that the governments of the U.S. and Germany have been liquidating their cryptocurrency holdings. This government liquidation has increased supply and lowered prices, exacerbating the market's problems. The current selling volume is beyond the market's liquidity capacity, meaning even modest sales volumes can have a significant impact on the price.
Given the scale of the liquidations, large sell-offs from institutional and governmental sources, and overall negative market sentiment, a rapid recovery seems unlikely. It may be prudent to prepare for a midterm bearish market.