Bitcoin Hit by $100 Million Liquidation Bomb, Will it Recover to $80,000 or Collapse to $78,000?

▲ Bitcoin (BTC)/AI generated image ©

Bitcoin (BTC) plunged after a massive liquidation of over $100 million just as it was on the verge of settling at $80,000, with the fear of a 'long squeeze' resulting from excessive leveraged investment returning as a boomerang, weighing on the market.

According to CoinMarketCap, a cryptocurrency market data aggregator, on May 14 (local time), the price of Bitcoin (BTC) fell by 1.42% over the past 24 hours to $79,558.29, leading the bearish trend in the overall virtual asset market. The primary cause of this decline lies in the explosive liquidation volume in the futures market. Bitcoin liquidations surged by 87.57% in a single day, reaching $105.96 million. In particular, leveraged long positions, which had bet on price increases, were forcibly closed, creating strong selling pressure. This is analyzed as the result of the bubble created by excessive market optimism bursting in an instant, leading to a large number of so-called 'weak links' being flushed out.

Changes in capital flow from a macroeconomic perspective are also notable. Recently, Bitcoin has shown a negative correlation of -0.48 with the S&P 500 index, while recording a positive correlation of +0.41 with gold. This suggests that investors are beginning to perceive Bitcoin as a macro-sensitive asset similar to gold rather than a risk asset, and it shows that the rotation phenomenon, where risk-off sentiment due to interest rate volatility or a strong dollar leads to Bitcoin selling, is intensifying. Currently, the total market capitalization of virtual assets has also fallen by 1.25% to $2.65 trillion, indicating an overall risk reassessment in the market.

The short-term direction of the market depends on whether key support levels are defended. The most critical zone currently is the $78,000 support level. If Bitcoin successfully defends this zone, it could enter a sideways consolidation phase to reclaim $80,000. However, if this level breaks, additional cascading liquidations of leveraged long positions could occur, significantly increasing the risk of the decline extending to the $76,000 level. In particular, the fact that the average funding rate remains positive at +0.0053% indicates that potential downside risks still exist in the market.

In conclusion, Bitcoin is facing a double whammy of unwinding overheated leverage and macroeconomic uncertainty. Experts warn that downward pressure may persist until open interest in the futures market sufficiently decreases and market leverage normalizes. Investors need a conservative approach, monitoring the defense of the $78,000 level in real-time and preparing for the possibility of an additional 'flash crash'.

*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.*