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4 Factors That Triggered Bitcoin Bloodbath This Week

The market crash was triggered by a "cascading long squeeze," investor fatigue at the $65k consolidation, and significant outflows from Bitcoin ETFs, notably Grayscale, creating a precarious situation for long positions.

Key Insights

  • According to Willy Woo, a "cascading long squeeze" forced overly bullish investors to sell, driving the price of $BTC down to $58,000.

  • Bitcoin sentiment is at an 18-month low due to the $65k consolidation and investor fatigue.

  • Over $1 billion left the Spot Bitcoin ETF market in the last two weeks, with Grayscale leading the outflow.

  • More long positions are at risk if Bitcoin rallies than falls. However, the next few days are crucial to see where Bitcoin goes.

At large, Bitcoin and the crypto market have seen more action in the last two weeks than in the previous two months combined.

On Monday, we saw one of the worst flash crashes in June, with Bitcoin going as low as the $58,000 zone and all the way to $62,000 in a matter of hours.

<div class="paragraphs"><p>BTC LiquidationChart</p></div>

BTC LiquidationChart

Soon after this crash, Bitcoin rallied straight up to the $61,00 zone once again, registering less than a 2% change in price between Monday and Tuesday.

As a result, this rapid change in prices caused a staggering $156 million in bullish liquidations and $20 million in bearish ones.

Data from Coinglass even shows that this liquidation wave is the worst the market has seen since mid-April of this year.

So, what is going on with Bitcoin?

In this section, we review four of the most important things—the fundamental, the technical, and the interesting—to know about Bitcoin, especially this week.

1. Why Bitcoin Crashed in the First Place?

According to insights from analyst Willy Woo in a recent tweet, this week's crash might have been caused by a "cascading long squeeze."

But what is a “cascading long squeeze”?

Long squeezes typically happen when a large group of investors have bullish open bets on a cryptocurrency.

However, sometimes the market starts to turn on these investors, forcing—or squeezing them into a corner where they begin to sell.

This wave of selling adds to the ongoing bearishness, pushing the market further down and worsening the decline.

Willy Woo tweeted that "speculators kept adding to new long positions." These long positions added more fuel to the liquidation spree, allowing Bitcoin to decline to the $58,000 zone, which "just got taken out."

This means that it is safe to assume that the bulls themselves were indirectly responsible for Monday’s crash.

2. Bitcoin Sentiment Index Lowest Score in 18 Months—Now Sitting at “Fear”

According to Santiment in a recent tweet, The Bitcoin "crowd" has become mostly fearful or disinterested in Bitcoin this month, especially with the cryptocurrency's nearly endless consolidation between $60,000 and $65,000.

According to Santiment, this drop in the cryptocurrency's sentiment score is the lowest it has been in 18 months. Bitcoin trader Fatigue and whale accumulation (and manipulation) further worsen the situation.

More factors contributing to this drop in investor sentiment might be the constant outflows from the spot Bitcoin ETF market, which, according to data from Farside, saw its harshest rate of outflows ($174 million) since June 14 on Monday this week.

<div class="paragraphs"><p>$174 million in outflows</p></div>

$174 million in outflows

However, Santiment mentioned in the original tweet that market conditions like these generally lead to bounces that reward the patient.

3. Speaking of Bitcoin ETF Outflows…

Speaking of spot Bitcoin ETF outflows, the ETF market has bled upwards of $1 billion worth of $BTC over the last week, according to data from Farside.

In more detail, these exchange-traded products have lost around $1.3 billion over the last two trading weeks as of June 25, with Grayscale unsurprisingly leading the reds with more than $500 million worth of outflows.

<div class="paragraphs"><p>Outflows from the Spot Bitcoin ETF Market.</p></div>

Outflows from the Spot Bitcoin ETF Market.

To put things further into perspective, it is important to mention that since April, when we saw outflows of more than  $1.2 billion in the mere ten days between April 24 and the beginning of May, this current wave of outflows has been the worst the market has seen so far.

4. The Ongoing Liquidation Stack

According to data from Coinglass, Bitcoin's liquidation map shows that more positions are at risk if Bitcoin rallies to $67,000 than if it declines to $54,000.

<div class="paragraphs"><p>Bitcoin Exchange Liquidation Map</p></div>

Bitcoin Exchange Liquidation Map

As shown above, a rally to the $67,000 zone would involve around $2.44 billion in liquidations, while a decline to $55,000 would involve around $1.83 billion.

This puts slight but still significant pressure on the price of Bitcoin to go up, and the next few days might be interesting to watch when it comes to where Bitcoin goes next.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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