The crypto realm has just seen one of the massive liquidations. As per CryptoQuant, the recent price dip of Bitcoin ($BTC) has triggered the biggest liquidation in long positions since the 2023’s September. A CryptoQuant analyst has discussed the possible reasons and outcomes of this notable shift in the market.
The market has been cleaned out
“BTC price drop shock has led to the largest liquidation of long positions in recent times… The market has been cleansed, and the open interest trend has finally broken down” – By @mignoletkr
Link
https://t.co/fYs10fAIo6 pic.twitter.com/27znZMRzqs
— CryptoQuant.com (@cryptoquant_com) February 3, 2025
Excessive $BTC Liquidations Parallel Open Interest Trend’s Ultimate Crash
The CryptoQuant analyst asserted that some assimilate Bitcoin’s latest liquidation to the enormous FTX collapse as well as the market crash during COVID-19. This liquidation in Bitcoin’s long positions is reportedly the largest since the year 2023’s September. The significant sell-off has largely “cleansed” the crypto market, dissuading over-optimistic crypto traders who were continuously betting on the further price surge. The open interest trend has ultimately crashed, suggesting a reset in the case of trader positioning.
Coinbase Premium Gap Data Underscores Increased Purchasing Activity
The exclusive liquidation reflects how many crypto traders were excessively confident about the price action of Bitcoin. The volume of this liquidation has exceeded the analogous events during the past eighteen months. This highlights the extent of overleveraged Bitcoin positions that are no longer available. Nevertheless, irrespective of the panic, a few consider the big players to be leveraging this situation. Coinbase Premium Gap data signifies that purchasing activity has heightened on Coinbase. Hence, whales are potentially absorbing the newly created liquidity resulting from the market crash.
Traders Watch for Potential Stability While Excessive Leverage Leaves Bitcoin Market
Even though sentiment is mostly volatile, veteran traders utilize huge sell-offs as likely entry points. While the excessive leverage has been cleansed off the market, $BTC is potentially in a better state to see a relatively stable progress from now onward. However, the next few days will play a critical role as traders are evaluating Bitcoin’s movement toward robust support levels.
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