Bitcoin and the general cryptocurrency market continue to struggle as prices plummeted this weekend. On Friday, January 31st, the crypto market appeared to be gearing up for another weak weekend, with prices stabilizing somewhat after Thursday’s debacle.
However, this weekend the market completely bucked that trend, with Bitcoin and other large digital assets falling by almost double digits on Saturday. Let’s take a look at the factors behind this sharp decline and the immediate outlook for virtual currency prices.
Why did Bitcoin and crypto prices fall this weekend?
After Bitcoin initially fell to $81,000, a variety of reasons swirled around, ranging from geopolitical tensions to the FOMC’s decision to keep interest rates on hold. But the continued decline in prices, even on a typically slow weekend, suggests other factors are at play.
In a new post on social media platform According to the report, examining crypto flow data sheds further light on this market challenge.
According to Kobeisi Letter, the recent price decline witnessed by the world’s largest cryptocurrency by market capitalization is entirely due to the liquidity situation. As shown in the highlighted chart, Bitcoin has witnessed three well-defined waves of liquidations, totaling over $1.3 billion in the past day.
Source: @KobeissiLetter on X
Financial market commentators also said that liquidity in the cryptocurrency market has been volatile at best recently. However, the continued extreme leverage levels in the Bitcoin market have created an “air pocket” in the price.
Koveisi’s letter adds:
Add to this the crowd-like sentiment, constantly changing from extremely bullish to extremely bearish, and the swings become even more aggressive.
Unsurprisingly, the market-wide price correction caused the market to experience one of the largest liquidation events in crypto history. According to market data, around $2.5 billion worth of leveraged longs have been liquidated in the digital asset market in the past 24 hours, making it the 10th largest crypto liquidation event in history.
More importantly, $1 billion worth of leveraged long positions were liquidated in less than five minutes as Bitcoin’s price fell to around $76,000 on Saturday.
Virtual currency market capitalization decreases by 7%
As of this writing, the market capitalization of cryptocurrencies stands at approximately $2,725 billion, reflecting a drop of nearly 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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