Bitcoin, a $15 Billion Liquidation Bomb...Both Trading Volume and Buying Speed ↓

▲ Bitcoin (BTC) / AI Generated Image

Bitcoin (BTC) continues its upward trend, but within the derivatives market, the risk of large-scale long position liquidations is increasing. While approximately $15 billion worth of leveraged long positions have accumulated below the current price, the short position liquidation volume above is only about $3 billion, causing the market structure to heavily lean towards downside liquidity.

According to NewsBTC on May 7 (local time), crypto trader Max Trades analyzed Bitcoin liquidation data, stating that approximately $15 billion worth of long position liquidations are concentrated below the current price. He explained that an extreme imbalance has formed in the Bitcoin market, where the volume of long liquidations significantly exceeds that of short liquidations.

The short position liquidation volume remaining above the current price is approximately $3 billion. This is a 5-to-1 difference compared to the long liquidation volume. NewsBTC reported that this structure significantly tilts the market towards downside liquidity, creating a high-risk environment where even a small price drop could trigger a cascade of liquidations.

Nevertheless, Bitcoin continues to show an upward push. NewsBTC explained that the recent rally has been sustained by new short position inflows and short liquidations. However, it pointed out that if short positions no longer provide upward fuel and market makers start to focus on the dense liquidity below the price, Bitcoin could become vulnerable to a rapid liquidation cascade.

Analyst Kaz noted that Bitcoin's trading volume has started to decrease. Although the perpetual futures cumulative volume delta continues to rise, the buying speed has noticeably slowed down. The spot cumulative volume delta is also rising, indicating that actual spot demand is supporting the rally, but recent candles show a weakening momentum.

Kaz viewed the current trend of Bitcoin slowly rising amidst decreasing volume, weakening momentum in the cumulative volume delta, and stagnant open interest as increasing the possibility of a short-term correction. He explained that making hasty decisions based on current movements is not appropriate, and future changes in open interest and spot cumulative volume delta will provide clearer direction.

NewsBTC reported that with volatility remaining in the market mid-week, Bitcoin could still turn bearish. The analysis suggests that even if Bitcoin rises further before the New York session opens, without significant support from open interest and spot demand, the likelihood of a sharp drop after the New York session opens increases. As of the time of writing, Bitcoin was trading at $81,064.

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