Bitcoin prices briefly fell to a nine-month low of $74,546 on Monday, as massive cryptocurrency liquidations and falling precious metal prices roiled global markets.
summary
- Bitcoin prices fell to April low levels on Monday.
- A surge in cryptocurrency liquidations and falling gold and silver prices have turned investors away from the bellwether.
Bitcoin (BTC) price fell 5.7% on Monday, February 2, hitting an intraday low of $74,546 before settling at $76,473 at the time of writing, according to data from crypto.news. The latest decline took the leading asset to its lowest level since April last year.
Zooming out, a continued downtrend began on Thursday after Bitcoin price lost its $90,000 psychological support level. It has since fallen 17%, increasing total losses to about 40% from this year’s peak.
Bitcoin prices have fallen due to a combination of liquidations due to extreme leverage and a meltdown caused by the precious metals mania, forcing traders to sell other assets to cover their losses.
According to data from CoinGlass, $798 million in liquidations occurred in the cryptocurrency market today, the majority of which was due to highly leveraged bullish bets. Bitcoin alone accounted for more than $200 million in liquidations over the long period.
Liquidation occurs when an exchange or broker is forced to close a trader’s position because the market has moved against them and there is no longer enough margin to cover the risk. The majority of long position wipeouts occur when an asset’s price faces a sudden and unexpected decline. Exchanges may be forced to close these bets, which could trigger a liquidity cascade that continues to negatively impact prices.
This round of liquidations first took hold over the weekend, wiping out more than $2.4 billion in bullish positions and creating an atmosphere of fear that continues to drive traders away from the market.
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The selloff was further exacerbated by the precious metals meltdown. The collapse in gold and silver prices has forced many traders to liquidate their Bitcoin holdings to cover losses on their precious metals positions.
President Donald Trump’s recent nomination of Kevin Warsh to be the next Fed chairman also dealt a blow to traders’ appetite for risk assets. Investors fear that he will aggressively shrink the Federal Reserve’s balance sheet, tightening liquidity and effectively eliminating the easy money environment that tends to support speculative assets like Bitcoin.
On the other hand, unlike previous sell-offs, Bitcoin’s latest sell-off was formed by a lack of notable buyers. Institutional interest in traditional crypto assets has cooled significantly, with the Spot Bitcoin ETF recording over $1.6 billion in net outflows throughout January.
From a technical perspective, Bitcoin has lost several important support levels over the past week, most recently the $80,000 level, which has served as a major psychological support area in the past.
Market participants often view violations of such round number milestones as a sign that bears are taking over, and trader sentiment is becoming increasingly vulnerable. When these psychological lows are breached in large numbers, they tend to trigger waves of panic selling and forced liquidations.
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Disclosure: This article does not represent investment advice. The content and materials published on this page are for educational purposes only.
