Bitcoin and the general cryptocurrency market continued to struggle, as prices fell over the weekend. On Friday, January 31, it looked like the crypto market was bracing for another slow weekend, with prices stabilizing somewhat after Thursday’s bloodbath.
However, the market went completely against the trend this weekend, with Bitcoin and other large-cap digital assets falling by almost double digits on Saturday. Here’s a look at the factors behind this sharp decline and the immediate outlook for cryptocurrency prices.
Why Bitcoin and Crypto Prices Fell This Weekend
After Bitcoin’s initial plunge to $81,000, different reasons, ranging from geopolitical tensions to the FOMC’s decision to keep interest rates unchanged, swirled. However, the continued decline in prices, even during a generally gloomy weekend, suggests other factors are at play.
In a new post on social media platform According to the report, an examination of crypto flow data would provide insight into this market conundrum.
According to the Kobeissi Letter, the recent price decline observed by the world’s largest cryptocurrency by market capitalization is entirely a liquidity situation. As the highlighted chart shows, Bitcoin has experienced three well-defined liquidation waves, totaling over $1.3 billion over the past day.
Source: @KobeissiLetter on X
The financial markets commentator also mentioned that the liquidity of the crypto market has been unstable at best in recent times. However, sustained levels of extreme leverage in the Bitcoin market have caused “air pockets” to form in prices.
The Kobeissi Letter added:
Add to that herd sentiment, constantly moving from extreme bullish sentiment to extreme bearish sentiment, and the swings become even more aggressive.
Unsurprisingly, the market-wide price correction saw the market facing one of the largest liquidation events in crypto history. Market data shows that approximately $2.5 billion in leveraged long positions were liquidated in the digital asset market over the past 24 hours, marking the 10th largest cryptocurrency liquidation event on record.
Most notably, over $1 billion in leveraged long positions were forcibly closed within 5 minutes, with the price of Bitcoin falling to around $76,000 on Saturday.
Total crypto market capitalization decreased by 7%
As of this writing, the total cryptocurrency market capitalization stands at approximately $2.725 trillion, reflecting a decline of almost 7% over the past 24 hours.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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