Bitcoin’s $72K crash sparks a whale leverage war — What’s next?

Bitcoin [BTC] has experienced massive volatility since it breached the $80k support level. The king coin has experienced sharp declines, reaching a low of $72k, and has since rebounded to a local high of $76,873. 

As of this writing, Bitcoin traded at $76,049, down 2.63% on a daily timeframe. Amid extreme volatility, investors have adopted aggressive positions in the derivatives market.

Bitcoin whales scramble for Futures positions

With Bitcoin firmly holding below $80k, the market has experienced a sudden surge in demand for longs and shorts. The battle for Futures position is especially prevalent among large market players.

According to Onchain Lens, a Whale deposited $3 million in USDC and opened a BTC long position with 20x leverage. Previously, this whale recorded an $11 million loss on its long positions.

Another Whale deposited $5.2 million USDC and opened a BTC short position with 14x leverage, according to Onchain Lens. Before the current market slip, this whale had made approximately $10 million on his short positions. 

Interestingly, these two whales are not an isolated case, as investors across exchanges have largely shifted to the Futures market. 

According to CoinGlass data, Derivatives Volume increased by 50% to $108 billion, while Open Interest fell to $50.9 billion. The volume hike suggested increased investor participation, either by taking short or long positions. 

In this case, investors on Binance and OKX have predominantly held long positions, with an average ratio of 2. However, across all exchanges, short positions have dominated, with the overall ratio holding below 1 at 0.958. 

A ratio below 1 suggests that most Futures participants are bearish and actively positioned for further downside. 

Can Futures demand boost struggling BTC?

Although Bitcoin has experienced massive panic selling, demand for futures positions has also created significant buying pressure in the market. As such, nearly $26 million in capital is flowing into the futures market.

Despite this capital flow, the bearish trend has smoothed. Looking at the DMI-ADX smoothed indicator, the negative index sits above its positive index at 36.

As a result, the ADX smoothed around 36 at press time, indicating a higher likelihood of bearish continuation bias. As such, sellers are in control, and any upside move is not a trend reversal but a mere pullback.

Therefore, if the trend continues, Bitcoin could see another drop towards $74k before attempting another leg up. For a reversal, the demand must be strong enough to reclaim the Simple Moving Average at $81k.

Final Thoughts

• Bitcoin [BTC] is under extreme volatility, dropping to $72k before rebounding to $76k. 
• Bitcoin whales are adopting an aggressive futures-market positioning, with short demand dominating the market.