Bitcoin's price encountered a flash crash, dropping to a low of $92,600, but has since recovered. This was mainly influenced by the dual pressure of long liquidation and profit-taking by long-term Bitcoin holders (LTH). As market sentiment changes, whether low-buying buyers can enter the market in time will be key to the future market trends.
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In the past 24 hours, the liquidation amount in the cryptocurrency leveraged contract market reached $530 million, with long positions (buy orders) liquidated at $386 million and short positions at $143 million.
Why did Bitcoin suddenly drop?
1. High leverage liquidation wave
Bitcoin's recent surge has been excessive, far exceeding its daily average line level. As the price approaches the $100,000 mark, there has been a significant amount of profit-taking activity, which has dampened market sentiment.
CoinGlass and trading volume data from major centralized exchanges also show a significant amount of selling in the perpetual leveraged contract market. Liquidation-induced selling: trading volume surged, and the market became passively uncontrollable.
Bitcoin faced significant selling pressure as it approached $100,000, and it is expected that Bitcoin will consolidate around this region for some time.
2. Long-term holders taking profits
In addition to forced liquidations caused by leveraged contract trading, long-term Bitcoin holders (LTH) have also become behind-the-scenes drivers of this sell-off.
The LTH group holding for 6 to 12 months has an average cost basis of about $57,900, significantly lower than the current market price. They are seizing this opportunity to take profits, with monthly selling pressure reaching 366,000 Bitcoins, marking the highest level since April of this year.
3. Capital rotation and conversion
Investors are starting to move funds to smaller market cap cryptocurrencies that carry higher risks.
Recently, some cryptocurrency hedge funds and family offices have started to shift from Bitcoin to Ethereum ($ETH). Ethereum has risen over 4% in the past 24 hours, outperforming Bitcoin.
The cryptocurrency options market has also seen some interesting changes. In the short term, call options (bullish options) for Ethereum are far higher than put options, while Bitcoin positions are mainly concentrated after December 2024.
This indicates that options traders expect Ethereum to perform well in the short term, while Bitcoin may not see another wave of increase until next year.
Bitcoin short-term correction, pay attention to market rotation
When Bitcoin is in a range-bound market, it is advisable to maintain a neutral stance on the market, and buying during corrections will be a more reasonable risk-reward strategy.
Bitcoin has recently surged, and some degree of correction is a healthy situation. During Bitcoin's consolidation, Ethereum is expected to perform even better.
But in the long run, Bitcoin remains the dominant player in the cryptocurrency market, although it might enter a phase of range-bound trading in the short term. Investors need to closely monitor the capital rotation in the market and adjust their portfolios accordingly.
The future market will depend on whether it can maintain consolidation supported by 90,000 or continue to break down directly. The best scenario would be for Bitcoin to consolidate at high levels, allowing Ethereum to rise and drive many altcoins to take off. Once Ethereum continues to rally, even if Bitcoin breaks below the 92,500 support, it gives Ethereum room for a pullback, which is a relatively good state for a bull market relay. By utilizing support, corresponding short-term strategies can be effectively implemented, and with a determined stop-loss line, one can look for some potential altcoins to participate and hedge against Bitcoin's downside risk by shorting Bitcoin appropriately.
This is where one can ambush high-quality altcoins that have not yet surged. For those that have already skyrocketed several times, one might consider reducing some positions, at least to break even. For cautious investors, it might be wise to sell everything and switch to those that haven't risen.
Of course, with good expectations in the future, funds are fully flowing into the market for accumulation, which undoubtedly indicates optimism for the future market. This also provides a safeguard against price declines, especially for BTC. If there is a significant short-term downturn, I believe it may trigger a lot of capital to buy at the bottom.
If the short-term expectations of a Trump victory are not sustained, then we should prepare for a correction, based on market analysis. Overall market capitalization is decreasing, with BTC and ETH market caps decreasing while altcoin market cap is increasing. Based on the proportions, market risk appetite is gradually improving, but currently, the plight of altcoins still relies excessively on the meme sector.
