U.S. Long-dated Bond Yields Surged as Inflation Fears Mounted

Long-dated treasury securities have breached 2022 highs, with 10-Year reaching 4.34%, 20-Year reaching 4.45% and 30-Year reaching 4.64% as of 23rd August. The market is pricing in a prolonged and higher interest rate policy, which may trigger further downside in equities and risky assets if the upcoming U.S. Core PCE Price Index release on 31st August indicates a rising inflation situation.

Bitcoin Trailed A Broader Market Downturn

The recent decline in Bitcoin's value has been concurrent with a broader market downturn, including decreases in the S&P 500, Nasdaq Composite, and Gold prices. This downtrend began after the latest Federal Open Market Committee (FOMC) meeting, where Chairman Powell signalled a likely prolongation of interest rate hikes, and was exacerbated by the 3.2% increase in the Consumer Price Index (CPI) for July, which marked the first uptick in 12 months.

Bitcoin Sell-off Wiped out $4B in Aggregate Open Interest

Throughout July and mid-August, the price of Bitcoin has been trading within a range-bound consolidation pattern, coinciding with the strengthening of the Dollar Index. However, on August 16th, the release of the July FOMC Meeting Minutes triggered a sell-off in the cryptocurrency market, as the Fed indicated that they would maintain a restrictive monetary policy until there are clear signs of inflation containment. This resulted in the liquidation of over $150 million in long positions and a decline in open interest of approximately $5 billion in aggregate. The deleveraging event also caused funding rates to turn negative. Notably, the sell-off paused at $26,000, funding rates have returned to neutral territory, while aggregate open interest has remained relatively unchanged, suggesting ongoing uncertainty in the market.

Liquidation Order Flow Visualised

A series of liquidation events occurred within a 5-minute timeframe on August 17th, between 21:41 and 21:45 (UTC). The provided visualization indicates that the Perpetual Futures market on Binance exhibited a significant sell-side skew, causing the price to deviate from that of the BTCTUSD spot market during the liquidation period. Furthermore, it is evident that speculative buyers entered the market at 21:45, as the price of Bitcoin Perpetual Futures dropped just below its previous low ($24777) on June 15th at 11:17 (UTC).

It is noteworthy that the spot price did not reach its previous low ($24720) from June 15th at 11:17 (UTC). Consequently, it is reasonable to assume that stop-loss orders placed below $24,720 remained untouched and may be revisited in the near future.

Aggregate Liquidation Heatmap (Hyblockcapital)

According to the aggregate liquidation heatmap from Hyblockcapital as of 23rd August, significant liquidation orders ranging from $22,000 to $25,000 are still present. These orders are triggered when the market price reaches or falls below the specified level, resulting in the automatic liquidation of their positions.

The existence of such substantial liquidation orders suggests that there is a considerable amount of selling pressure in the market, particularly in the range of $22,000 to $25,000. Traders who have placed their stop-loss orders at these levels are likely anticipating further price declines and are prepared to exit their positions if the market moves against them.

It's important to note that this information is based on the provided aggregate liquidation heatmap from Hyblockcapital, and it represents a snapshot of the market conditions at a specific point in time. Market dynamics can change rapidly, so it's crucial for traders and investors to stay informed and monitor the market closely for any updates or shifts in the order book.

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