Bitcoin grazed its previous all-time high (around $69,044) on Tuesday, March 5, 2024, this week, as investors celebrated.
However, around $200 above this resistance, things went very bad for the Bitcoin bulls.
Bitcoin declined straight down from around $69,200 to as low as $59,000, wiping the leveraged by-trades out of the market.
But this wasn't all.
Bitcoin reversed course again from $59,000, pulling a forked mass liquidation move against the bulls and bears as it rallied to around $67,000 where it now sits
At the end of the day, more than $1 billion had been taken from traders across the board.
But what really happened? Why did Bitcoin behave the way it did?
Data from Binance's order book shows that investors placed a few massive sell orders right around the time Bitcoin breached its all-time high, creating significant resistance to Bitcoin's price.
For instance, on Tuesday, Binance's order book showed that there were 300 BTC, worth about $20 million, to be sold at $69,000 and more than 500 BTC for sale at $70,000.
Right around the time that Bitcoin breached this previous ATH, some of these orders got triggered, sending the price of the cryptocurrency falling by as much as 10%.
Moreover, there have also been reports that the selloff might have been due to a miner or some other whale who held an undisclosed "large amount" of Bitcoin and dumped it, right after the ATH.
At the time of writing, Bitcoin appears to have recovered some of its losses and now trades at around $67,000 according to data from CoinMarketCap.
According to data from Coinglas, the flash crash had a massive ripple effect on the entire crypto market, as billions of dollars in leveraged longs (and eventually, shorts) were wiped off the market in mere hours.
According to data from CoinGlass over $1.1 billion worth of leveraged trades across all digital assets were liquidated through the past 24 hours, with $870 million of them being longs.
In essence, traders who took leveraged trades were forced to close their positions at a loss, as the price of Bitcoin and others like Ethereum, Solana and others crashed below their thresholds.
Moreover, according to a March 6 post on X from Santiment, the total open interest on exchanges for Bitcoin, Ethereum, and Solana crashed massively after the BTC dip.
Santiment notes that Bitcoin's open interest fell $1.46 billion (-12%) over the course of a few hours, while Ether's dropped $967 million (-15%), and Solana's tumbled $424 million (-20%).
Santiment also said that most of the bets that traders made on Bitcoin's price came from traders opening long positions and expecting Bitcoin to continue upwards above $70,000.
In essence, Santiment concluded that the open interest plummet may be good news.
It simply means that the over-leveraged trades have been temporarily removed from the markets, and shows that the market could be more stable and healthy after the correction.
Commentators like WIll Clemente have also stated that Tuesday's decline, while being harsher than the $1 billion leverage flush when Bitcoin suddenly dropped below $25,000 from $28,000 might be good for the market after all.
"Any dips are for shaking out over-leveraged apes and buying at this point," he says.
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