Bitcoin Drops 6% After $202 Million Long Liquidation

Over the weekend, Bitcoin's price experienced a significant decline, dropping to approximately $103,000 in the early hours of Saturday, May 31st. Although the premier cryptocurrency has since recovered, its price remains over 6% below the recently achieved all-time high of $111,814. On-chain data suggests that Bitcoin's price could resume its upward trajectory in the near future.

On May 30th, the Bitcoin market witnessed its third-largest long liquidation of the month, with $202 million in BTC long positions liquidated on the Binance derivatives exchange. This event was highlighted by on-chain analyst Burak Kesmeci in a Quicktake post on the CryptoQuant platform. The liquidation occurred as leveraged trading and speculative pressure increased on the world’s largest crypto exchange, with Bitcoin's price rallying from around $94,000 to a new record high above $111,000. Long liquidations typically occur when derivatives traders are forced to close their positions due to sharp price movements, leading to automatic sell-offs that can further trigger volatility in both directions.

The latest liquidation event, involving $202 million worth of BTC long positions, is the third-largest in the past month, following two larger liquidations on May 12 ($211 million) and May 23 ($277 million). This series of high-value liquidations reflects the increased speculative activity in the Bitcoin market over the past few weeks. While investors who suffered these liquidations may feel negatively impacted, these mass liquidations could be beneficial for the flagship cryptocurrency. By removing excessive leverage, the Bitcoin market can reestablish a more stable foundation for price discovery and a continued upward trend.

Another on-chain analyst, known by the pseudonym Darkfost, noted that Bitcoin funding rates remain at extremely low levels. This trend indicates that traders are hesitant to open new long positions, suggesting a cautious stance in the market. Typically, when Bitcoin breaks above its previous all-time high, funding rates surge, signaling increased euphoria and risk appetite. However, the current low funding rates suggest that investors are waiting for more clarity before committing to new positions. This cautious approach could be positive for Bitcoin's price and its upward trend, as it reflects a market that is not yet overheated and has room for further growth.

As of the latest update, the price of BTC stands at around $104,897, reflecting a mere 0.2% increase in the past 24 hours. The recent liquidations and low funding rates indicate a market that is stabilizing after a period of high volatility, potentially setting the stage for a sustained upward trend in the coming days.