- A look at how Bitcoin is faring in an extreme fear environment.
- Why liquidations may have played a role in pushing BTC below $60,000.
Bitcoin [BTC] has fallen below the $60,000 price range again after a brief recovery last week. This comes just days after the market started to become optimistic about a recovery again.
The current price development of Bitcoin is a reflection of the prevailing sentiment. Bitcoin/crypto fear and greed sentiment has dropped from fear to extreme fear over the past 24 hours.
This has subsequently resulted in the flow of liquidity out of the cryptocurrency.
This outcome suggests that the market may not be out of the woods yet after last week’s crash. BTC’s short-lived rally saw its price rise to $62,754 during Thursday’s trading session. It had a press time price of $58,172, down 7.58% from the weekly high.
Source: TradingView
The last retracement occurred in the middle of the RSI. This is important because it signals a greater focus on short-term profit-taking among Bitcoin traders. After all, the market is currently going through a phase of increased uncertainty.
There are growing concerns about the state of global economic markets following the recent recovery in carry trading in the Japanese Yen.
Some analysts fear more economic fallout is on the way. This also comes amid rising FUD regarding a recession.
More fuel for the bears?
An assessment of Bitcoin from a liquidity perspective reveals potential exposure to liquidations. Our review found that out-of-fund addresses peaked at 20.3%, which is roughly 10.84 million addresses at the peak of the recent dip on August 5.
The number of addresses from the money amounted to 7.14 million (13.38%) on August 11.
Source: IntoTheBlock
About 3.7 million addresses had injected liquidity into Bitcoin near recent lows. Meanwhile, the recent hype that quickly boosted BTC may have created more hype and hunger for leverage.
BTC’s estimated leverage ratio recorded an increase between August 9 and 11.
Source: CrptoQuant
Bullish expectations and leverage may have created a favorable environment for a new wave of liquidations. BTC net long positions peaked at $53.92 million on August 11 around the $61,129 price range.
This was right before a strong bearish move that pushed the price below $60,000.
Source: HyblockCapital
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These findings indicate that liquidations of leveraged long positions may have strongly influenced BTC’s price action over the past two days.
While liquidations may have contributed to Bitcoin’s current dip below the $60,000 price, there is no doubt that the market risks more downside if sentiment remains weak.