On Monday, the price of Bitcoin fell sharply by 5% to reach the level of $61,000. This sudden decline surprised investors and led to a large wave of liquidations. In just 24 hours, the liquidation value of cryptocurrencies reached approximately $300 million.
Reasons for Bitcoin's decline
Liquidation of long positions is one of the important reasons. The market witnessed a noticeable increase in the liquidation of long positions in Bitcoin, as $85.4 million worth of these positions were liquidated, which increased the selling pressure on the price. These liquidations occur when the market price reaches the liquidation price of leveraged positions, triggering automatic sales to cover losses, thus further declining the price and causing high market volatility.
The continued mining collapse is also a second reason, as the mining collapse refers to a situation in which miners begin to sell the extracted Bitcoin to cover operating costs due to lack of profitability. This increases the supply of Bitcoin in the market and puts additional pressure on prices. A mining collapse is a crucial phase to watch, especially after Bitcoin reward halving events that halve miners' rewards, adding to profitability pressures.
The third reason is the announcement of the bankrupt Bitcoin exchange platform Mt. Gox said it would begin repaying victims using assets stolen from the 2014 hack in July 2024. This news has sparked market fears of oversupply, as beneficiaries will likely sell Bitcoin that has risen in value significantly since their initial investment period. This news negatively affected the market and led to a decline in prices.
On Monday, the price of Bitcoin fell sharply by 5% to reach the level of $61,000. This sudden decline surprised investors and led to a large wave of liquidations. In just 24 hours, the liquidation value of cryptocurrencies reached approximately $300 million.
Reasons for Bitcoin's decline
Liquidation of long positions is one of the important reasons. The market witnessed a noticeable increase in the liquidation of long positions in Bitcoin, as $85.4 million worth of these positions were liquidated, which increased the selling pressure on the price. These liquidations occur when the market price reaches the liquidation price of leveraged positions, triggering automatic sales to cover losses, thus further declining the price and causing high market volatility.
The continued mining collapse is also a second reason, as the mining collapse refers to a situation in which miners begin to sell the extracted Bitcoin to cover operating costs due to lack of profitability. This increases the supply of Bitcoin in the market and puts additional pressure on prices. A mining collapse is a crucial phase to watch, especially after Bitcoin reward halving events that halve miners' rewards, adding to profitability pressures.
The third reason is the announcement of the bankrupt Bitcoin exchange platform Mt. Gox said it would begin repaying victims using assets stolen from the 2014 hack in July 2024. This news has sparked market fears of oversupply, as beneficiaries will likely sell Bitcoin that has risen in value significantly since their initial investment period. This news negatively affected the market and led to a decline in prices.
The impact of the decline on the market
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Within 24 hours, the number of traders who lost their positions exceeded 91,000, and over $282 million has been lost since then. As the Bitcoin and cryptocurrency market collapsed, the vast majority of this liquidation came from traders who were holding long positions, a whopping 91.59%.
As expected, Bitcoin saw the largest liquidation volume at $103 million. Ethereum followed in second place with $64 million, while Solana came in third with $13 million. Liquidation from other currencies also exceeded $38 million during this period.
Binance accounted for about 35% of the total liquidation at $102.9 million, while OKX recorded a liquidation of $82 million. Huobi, Bybit, and Bitmex came in third, fourth, and fifth places with liquidation values of $47.72 million, $21.33 million, and $15.15 million, respectively. While the largest single liquidation order was executed on Bitmex, where a trader lost $10 million on the XBTUSDT pair.
As of writing, the majority of liquidations have occurred in just the last 12 hours, making up $230 million of the total $282 million recorded. While liquidation volumes in the past hour exceeded $102.5 million. Despite the notable liquidation volumes, the last 24 hours are not the worst day in June. June witnessed many collapses, with notable liquidation trends during the month. For example, on June 7, liquidation volumes reached $360 million when the price of Bitcoin collapsed from $71,000 to $68,000.
Then again, on June 18, 24-hour liquidation volumes exceeded $300 million when Bitcoin fell from $67,000 to $64,000. If the price of Bitcoin continues to decline, liquidation volumes may continue to rise rapidly, and reaching $300 million may only be a matter of when rather than if it will happen.
Currently, Bitcoin price is struggling to hold on to the $61,000 level, with a decline of around 5% in the past 24 hours. If the bulls fail to maintain this level of support, the possibility of the price falling to the $50,000 area becomes much higher.
If you are a long-term investor, these declines may be an opportunity to buy Bitcoin at a discounted price, as the rise is coming, God willing. However, investments should always be diversified and not put all the money in one asset to reduce risks
