Bitcoin Faces 5% Crash Amid Liquidations and Weakness

Bitcoin faced a significant downturn over the weekend, crashing nearly 5% within just three hours on Sunday, as reported by Cointelegraph. The cryptocurrency had been trading around $91,500 before plummeting to $86,950, marking a dramatic decline that left many traders scrambling.

This sharp drop followed Bitcoin's first green weekly candle close in four weeks, where it ended at $90,411. The Kobeissi Letter suggested that the decline was triggered by a sudden surge of selling volume, which led to a domino effect of liquidations, particularly among leveraged positions.

Over 180,000 traders were liquidated within 24 hours, with total liquidations reaching $539 million, predominantly affecting long positions in Bitcoin and Ether, according to data from CoinGlass. This pattern of volatility is reminiscent of previous market behaviors seen in this bear market, characterized by structural weaknesses rather than fundamental declines.

CoinDesk echoed these sentiments, noting that nearly $646 million in leveraged positions were wiped out across major exchanges, with long positions constituting almost 90% of this total. The largest single liquidation occurred with a $14.48 million ETH-USDC order on Binance.

The forced liquidations, often a sign of market extremes, have left traders on edge as they navigate a fragile risk appetite amidst ongoing macroeconomic uncertainties. The market's struggle to stabilize has been compounded by a lack of liquidity and recent macro signals that have contributed to a rapid drawdown.

Furthermore, Bitcoin's performance in November marked its worst month since 2018, with a decline of 17.49%, as institutional demand waned significantly. During this period, U.S.-listed spot Bitcoin ETFs experienced net outflows of $3.48 billion, the second-largest redemption on record, further indicating a shift in market sentiment.

Analysts have pointed out that the current market environment is precarious, with technical indicators such as the monthly MACD histogram flashing red, which historically signals the onset of prolonged downturns.

This bearish crossover has led to concerns about the potential for further declines, as traders remain vigilant for signs of downside volatility. As Bitcoin's price continues to hover around critical support levels, with first support near $84,500, the outlook remains uncertain.

If these levels are breached, analysts warn that Bitcoin could test much lower thresholds, potentially exposing it to levels around $74,500 or even the 2021 peak near $70,000. The recent liquidations and market reactions highlight the inherent instability within the cryptocurrency space, particularly for highly leveraged positions as traders react to changing market dynamics.