Bitcoin’s derivatives market shows where the next big price reactions could happen. A liquidation map tracking leveraged positions on the Binance BTC/USDT perpetual market highlights clusters of highly leveraged trades positioned above the current market price. This scheme provides clues as to how the next Bitcoin price movement could unfold, how many short traders could be liquidated in the next sweep, and what could likely happen next.
The huge short liquidation wall is approximately $71,800
Bitcoin has traded above $70,000 over the past 24 to 48 hours, provide an early insight how price action could unfold for the leading cryptocurrency in March. Interestingly, the technical analysis of the BTC liquidation heatmap on Binance, which was posted on X by Crypto analyst Sherlock shows clusters of highly leveraged trades positioned just above the current market price. This is notable to look at because clusters often influence price direction as markets tend to move into zones where large amounts of forced liquidations can occur.
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The most prominent liquidity objective The chart shows it to be around $71,800, where a dense concentration of short liquidations has formed. This area is dominated by extremely high leverage positions, specifically 50x and 100x leverage, showing that many Bitcoin traders are heavily positioned on the assumption that Bitcoin will fail to recover more than $72,000.
As shown in the Coinglass liquidation chart below, the vertical liquidation bars around $71,000 to $72,000 are significantly larger compared to surrounding levels. This shows a build-up of short positions that would be forced to buy back Bitcoin if the market rises to that zone. A move to that level could therefore lead to a chain reaction of liquidations, which in turn would contribute to a rise as the short positions are closed.
BTC/USDT liquidation chart. Source: @Sherlockwhale Op
What happens after the liquidity action?
After the $71,800 level, the structure of the liquidation follows map changes noticeable. The bars on the chart get thinner over the range of $72,000 to $76,000, and the cumulative liquidation curve flattens out. This means that once the first wave of short liquidations breaks out, there may not be enough additional liquidation fuel to support a sustained rally.
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According to Sherlock, forced buying of liquidated shorts could take Bitcoin from $71,800 to $75,000, but if the rally were to be extended beyond that point real buyers and organic demand needed. No forced purchase.
At the time of writing, Bitcoin is trading at $70,500. The leading cryptocurrency faced continued downward pressure for most of February. although there are signs of gradual stain build-up are starting to emerge, and this could support a steady rally in March.
If new buyers fail to support the price after $76,000 liquidity is taken, the price could quickly lose upside momentum. In that case the price might be possible immediately fall below $60,000.
Featured image created with Dall.E, chart from Tradingview.com