Bitcoin's Weekend Swing Leads to $670M Liquidations, Spot ETFs See $607M Inflows

Bitcoin experienced a significant price swing over the weekend, reaching a high of $106,980 at 22:00 UTC on May 18 before plummeting to $102,300 by the following morning. This dramatic fluctuation resulted in $670 million in liquidations across various crypto futures, including Bitcoin, Ethereum, Solana, and Dogecoin. The initial surge was driven by short covering, but the subsequent drop was attributed to take-profit orders and thin weekend liquidity.

The volatile price action highlighted the risks associated with weekend trading, as the low trading volume on platforms like Binance exacerbated the market movements. Approximately $465 million in long positions were liquidated, while $224 million in short positions were squeezed during the initial rally. This underscores the potential for significant price swings during periods of low liquidity.

Despite the market turbulence, spot-Bitcoin exchange-traded funds (ETFs) saw substantial inflows, attracting $607 million net over the week ending May 18. BlackRock’s iShares Bitcoin Trust was a notable contributor, accounting for $839 million in inflows, although this was partially offset by outflows from smaller products. Additionally, corporate treasuries continued to accumulate Bitcoin, with Strategy, a US-listed software-to-Bitcoin vehicle, purchasing 13,390 BTC on Monday, valued at approximately $1.3 billion, bringing its total reserves to 568,840 BTC.

Open interest on exchanges has surged to a year-to-date high of $70 billion, indicating that additional leverage is entering the market. This parallels the second leg of the 2021 bull run, suggesting that the current market dynamics may be similar to those observed during the previous bull market.

Macroeconomic factors also played a role in the market's volatility. Moody’s downgraded its outlook on US sovereign debt, pushing the 30-year Treasury yield back above 5% and raising concerns about fiscal risk. This macroeconomic uncertainty added friction to the crypto rally, as investors reassessed the risks associated with US dollar assets and sovereign debt.

Analysts have noted that the recent price action may validate the view that Bitcoin is not just another company in the S&P 500, but rather a distinct asset class with its own dynamics. The political and economic realignment, including factors such as tariffs and Treasury chaos, is seen as part of a broader shift where Bitcoin serves as a release valve for market tensions.

Looking ahead, the persistence of spot-ETF inflows above $500 million per week will be a key indicator of market sentiment. A slowdown in inflows could test support at $100k. Additionally, the build-up in open interest in perpetual futures suggests that rising leverage may set the stage for another squeeze. Further US fiscal headlines could amplify volatility across risk assets, as renewed stress in the bond market could impact broader market dynamics.