Bitcoin Nears All-Time High, Triggers $229.28 Million in Liquidations

Bitcoin's recent market dynamics have presented a mix of encouraging and cautionary signals for traders and long-term holders alike. On Wednesday, 09 July, Bitcoin nearly reached its all-time high, falling just $60 short of $111,970. This surge was accompanied by significant liquidations, with $229.28 million worth of positions being closed in the last 24 hours. Notably, only $12.8 million of these were long positions, highlighting the effectiveness of the short squeeze. A substantial $7.8 million worth of short liquidations were triggered within a minute on Binance, underscoring the intensity of the market movement.

Analysts observed that the amount of Bitcoin inflows to Binance, the largest centralized exchange, was extremely low. These low inflows were at their lowest point during the entire cycle, even as the price nearly set a new all-time high. The monthly average for inflows was 5.39k BTC, and the daily average was at 3.19k BTC. Typically, inflows represent an intent to sell, so the low inflows indicated a strong conviction among holders to retain their Bitcoin, rather than sell.

Despite the short squeeze, which saw a sizeable chunk of liquidity taken out, Bitcoin's price was thrown back to the $110.8k-level in the following hours. This suggested a price move to grab liquidity, raising questions about what to expect next. The 1-month liquidation heatmap highlighted the liquidity at $110k that was recently swept, indicating another magnetic zone at $112.6k, which could be revisited soon. Over the past two weeks, Bitcoin has moved sideways, allowing liquidity to build up both above and below it, before gravitating to these liquidity pockets.

However, there were warning signs for traders. The estimated leverage ratio has been trending higher since April, with a sizeable spike in early July as BTC approached the $108k-mark. This indicated an increased willingness to assume risk in the derivatives market. The hike in Open Interest could set up conditions for liquidity grabs, as seen recently. Additionally, the stablecoin netflows’ 14-day moving average showed stablecoins flowing out of exchanges since 30 June. A fall in stablecoins on exchanges implies a fall in buying power, which could hurt the chances of an organic crypto market rally. There should be caution regarding immediate, new demand in the market.

The low BTC inflows underlined a lack of willingness to sell, but the stablecoin flows indicated reduced buying power. The Open Interest and liquidations data showed a market eager to jump between liquidity pockets and the threat of significant volatility in the short term. Hence, traders should remain cautious, while spot holders need to remain patient.