Bitcoin Drop Triggers $71 Million Liquidation

▲ Bitcoin Plunge / ChatGPT Generated Image ©

As Bitcoin dipped below $77,000, a massive $71 million liquidation occurred in just one hour, causing a rapid collapse in the leveraged market.

According to investment media FXLeaders on April 27 (local time), approximately $71 million in liquidations occurred in the cryptocurrency derivatives market over about an hour, with $69.17 million of this coming from long positions. Bitcoin's temporary drop below the key support level of $77,000 led to a concentrated clear-out of excessive leveraged long positions.

The main reason for this sharp decline was the low liquidity in the $77,000 to $78,000 range. This section had thinly formed buy and sell orders, making it susceptible to amplified price shocks. Indeed, concentrated long risks around $77,300 simultaneously triggered a cascade of liquidations. In contrast, short positions were largely unaffected.

Following the liquidation, the market quickly appears to be stabilizing. Bitcoin has recovered to the $77,500 to $78,500 range and showed an intraday gain of approximately 1%. This follows a 10-12% rebound in early April, with the price continuing to retest key resistance levels.

Looking at the market structure, open interest remains concentrated in the $77,000 to $80,000 range. On days when volatility expands, the daily liquidation volume often increases from $80 million to over $300 million, indicating that the current range is also considered to have an overcrowded leveraged position.

This liquidation event demonstrated the fragility of the derivatives market despite strong inflows into spot Bitcoin ETFs. Recent inflows for 9 consecutive days, totaling $2.12 billion, had fueled expectations for a rise, but ultimately, the excessive accumulation of leveraged long positions ended up increasing downward pressure.

In the short term, there is also a possibility of a rebound or a short squeeze after entering an oversold zone. However, with $77,000 acting as a key support level and the $78,000 to $80,000 range serving as strong resistance, a volatile market is expected to continue for some time. In the current structure with a high proportion of leverage, risk management is considered more crucial than directional bets.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*