Bitcoin’s latest sell-off wiped out $612M, but the real warning lies elsewhere
The Bitcoin market was in a risk-off regime, but it has not yet reached cycle bottom extremes.
Liquidation data for the past 24 hours showed that Bitcoin [BTC] witnessed $169.28 million in liquidations in the past 24 hours. The majority were long liquidations. Across the market, $612.04 million has been liquidated, with $548.72 million being bullish bets.
This represented the largest single-day liquidations since the price crash toward $60k that occurred on June 4.
Long squeeze potential threatens aggressive dip buyers
Glassnode noted that traders on the decentralized exchange Hyperliquid were increasingly taking up long positions, despite the bearish price trends in recent weeks. Aggressive long positioning despite the price dip meant that there was an amplified risk of a squeeze to force these long liquidations.
AMBCrypto reported that rising leverage and low demand can set up a liquidation event in the coming weeks. Dip buying could get punished if weak spot demand continues and derivatives positioning gets more bullish.
Assessing the strong downward pressure on Bitcoin
The Bitcoin supply in profit reached its lowest level in years, observed crypto analyst CW8900. In a post on X, the user plotted a rising trendline from 2012. The supply in profit recently fell below this trendline, a sign of weakness greater than in previous cycles.
The strong downward pressure suggested that the cycle bottom might have been achieved already, but other metrics indicated otherwise.
Analyst Axel Adler Jr. used the adjusted NUPL metric to show that most of the past three months were spent with the aNUPL line below zero. In other words, the majority of the past 90 days saw the market facing unrealized losses, on average.
At the same time, it has not reached the capitulation extremes of previous cycles. For instance, the current reading was only -0.14 compared to the -0.4 extremes.
The short-term holder realized cap drawdown reached 56%, deepening from -26% three months ago. Meanwhile, the long-term holder realized cap drawdown was near zero. This highlighted the fact that market participants were facing stress, but this stress was disproportionately on the STH group.
The LTH cohort was holding up, but the STH cohort faced capital outflows. The deepening realized cap drawdown signaled capitulation among the weaker hands.
The market was in a risk-off regime, but it has not yet reached the cycle bottom extremes.
Final Summary
- The rising willingness among market participants to buy the dip could set up a long squeeze and a sizeable liquidation event.
- The long-term holders were holding up well, but short-term holders were facing increasing losses, and capital in this group was shrinking.
