Significant losses totaling $1.89 billion reported in Bitcoin as it plunges below $118K. The question remains, has the worst of this crypto downturn passed?
In the cryptocurrency market, a significant shift has been observed in the derivatives market on Binance, characterized by a rapid decrease in open interest, net taker volume, and a surge in liquidations. This situation typically indicates a capitulation phase and heightened bearish sentiment in Bitcoin markets.
The price of Bitcoin on Binance fell from $124K to below $118K, with the Net Liquidations 8-hour change surging to $130 million, primarily from forced closures of overleveraged longs. This surge in liquidations triggered a cascade of sell orders and amplified downward momentum.
Such a price drop and volume change often reflect a swift change in sentiment from bullish to defensive. Historically, such steep declines have frequently aligned with local price bottoms on shorter timeframes. The sharp reversal suggests that selling pressure may be approaching exhaustion.
On-chain analytics indicate that local bottoms often occur when holders are capitulating—i.e., absorbing losses and exiting positions—creating a potential signal for a near-term price bottom. Despite current weakness and technical signals of bearish momentum, institutional adoption and expanding global liquidity remain strong medium-to-long-term drivers supporting Bitcoin price resilience and possible recovery after a capitulation phase.
Swissblock noted that Bitcoin failed to sustain its upward momentum after briefly reaching a new all-time high of $124.5K. The exchange's open interest (OI) plunged by 5% within hours. The market structure has transformed from bullish to bearish due to the crash.
Any rebound attempts could lack the necessary follow-through to hold gains, making them vulnerable to quick reversals. However, this raises the risk that near-term upward moves may prove temporary. The underlying strength of the market is being offset by structural weakness.
In summary, the described derivatives market shift on Binance reflects near-term bearish market sentiment and panic selling, which often accompanies or signals a price bottom forming as weak hands capitulate, potentially setting the stage for stabilization or a recovery phase thereafter.
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