Key Points
- Bitcoin’s liquidation events are significantly different from the 2020 and 2021 bull markets.
- Despite daily liquidations reaching $600 million, prices have found a bottom with minimal follow-through.
Bitcoin’s (BTC) liquidation events are currently not mirroring the sharp swings seen in the 2020 and 2021 bull markets.
This is according to blockchain firm Matrixport, which highlighted that even with daily liquidations sometimes hitting $600 million, the prices have managed to find a bottom with minimal follow-through.
Contrast to Previous Bull Markets
The current dynamics present a stark contrast to the previous years when high market leverage led to extreme volatility.
Markus Thielen, an independent analyst, stated that unlike the previous bull market, where liquidations triggered extreme volatility, now, even with substantial liquidations in Bitcoin and Ethereum on some days, the prices are finding a bottom with little follow-through.
Thielen further explained that the current system leverage is relatively low, and traders have become more strategic in setting stop losses.
Change in Market Perception
The approval of spot Bitcoin exchange-traded funds by the U.S. Securities and Exchange Commission may have also reinforced stronger market conviction.
Bitcoin is no longer viewed as a high-risk asset. The question has shifted from whether it could drop to zero to how low it might possibly drop.
While historical data suggests that liquidation-driven sell-offs are limited, risks are still present.
Analysts refer to the Inter-exchange Flow Pulse indicator, which monitors Bitcoin movement between spot and derivatives markets.
Typically, an influx of BTC into derivatives signals bullish momentum. However, currently, the indicator is flashing bearish, suggesting Bitcoin could face more resistance before a breakout.