Bitcoin Market Faces Major Shakeup: $120 Million Wiped from Open Interest Amidst Market Volatility
The Bitcoin market recently experienced a sudden jolt, erasing $120 million from open interest as the market began to recover from a week-long sideways movement. According to data from CoinGlass, around 2,000 BTC in open interest was wiped out when Bitcoin’s price fell from approximately $62,000 to about $59,900 earlier today.
This sudden drop exposed the vulnerability of excessively leveraged long positions, prompting CoinGlass to caution traders about reducing their leverage. The price movement during this sharp decline, followed by a weak recovery, highlighted the ongoing fragility of the market. Although Bitcoin has since slightly risen to $60,912 at the time of this writing, the recovery has lacked the momentum needed to reach previous levels.
This suggests that while the market has found temporary support, buyers have yet to regain control. Notably, trading volume remained subdued during the recovery period, indicating limited buying interest, which leaves the door open for further instability.
The Impact of Over-Leveraging in the Market
Market indicators like the Cumulative Volume Delta (CVD) and funding rates have further revealed the pressures traders face. The CVD saw a sharp decline during the price drop, reflecting strong selling pressure.
Meanwhile, funding rates shifted from positive to negative, signaling a shift from bullish to bearish sentiment. This shift significantly impacted open interest, with around 2,000 Bitcoin contracts worth over $120 million liquidated as the price dropped. The total liquidation, amounting to approximately 224,614 combined liquidations, underscores the market’s heavy reliance on leveraged positions, which proved unsustainable in the face of a steep decline.
On the chart, Bitcoin’s open interest had been trending upwards, reaching about $31 billion, with a 4.9% increase in the last 24 hours. This indicates a significant number of outstanding futures contracts, a clear sign that traders are taking leveraged positions on Bitcoin.
High Leverage at $60,000
The chart below illustrates a heatmap of BTC/USDT perpetual contract liquidations on Binance over a 12-hour period. The heatmap shows that many traders are using high leverage, especially around key psychological levels like $60,000.
Several horizontal bands below the $60,000 level point to additional liquidation pockets extending towards lower price levels (closer to $58,000). These liquidation clusters indicate that the market was over-leveraged, leading to forced liquidations.
Ongoing Selling Pressure Suppresses Bitcoin Price
As things settle, the Bitcoin market continues to face pressure from the imbalance between buy and sell orders. As of August 21, exchange data showed a significant increase in sell orders, with 53,000 Bitcoin sell orders compared to 47,000 Bitcoin buy orders.
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This imbalance has kept Bitcoin’s price suppressed, with the market showing no signs of a strong recovery. Adding to this pressure are external factors, such as the U.S. government and FTX creditors moving large amounts of Bitcoin to exchanges.
As a result, Bitcoin’s price remains stuck in a narrow consolidation range around the $60,000 level, reflecting an extended period of uncertainty and volatility.
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