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In summary
- Bitcoin fell 6.3% in minutes to $92,000, causing $1.07 billion in liquidations before recovering to $97,600.
- High funding rates signaled an over-leveraged market, which amplified liquidations of $390 million in long positions.
- The price of BTC maintains a 39% monthly increase, driven by Trump’s re-election and his pro-crypto approach.
On Thursday, the price of the world’s largest Cryptocurrency plummeted to its lowest level in more than a week in a matter of minutes, triggering more than $1 billion in liquidations before rebounding sharply.
At 5:26 pm ET, the price of Bitcoin plunged 6.3% to a three-minute low of $92,000. It then quickly recovered above $97,600 before falling another 1%, according to data from Coinbase.
Despite falling 1.7% on the day to $97,100, the asset is still up more than 39% over the past 30 days, fueled by bullish enthusiasm surrounding President-elect Donald Trump.
The move sparked more than $1.07 billion in liquidations across the market, with about 80%—or $817 million—coming from positions betting on higher prices, CoinGlass data shows.
Liquidations of long Bitcoin positions, meanwhile, have skyrocketed to more than $390 million in the past four hours.
According to Pratik Kala, portfolio manager at Apollo Crypto, the drop was expected as funding rates had risen sharply, signaling an overheated market.
“Many people opened long positions at the breakout of $100,000 with leverage and were liquidated,” Kala told Decrypt.
Funding fees are payments between traders who hold long and short positions in perpetual futures contracts.
These payments help keep the contract price in line with the price of the underlying asset.
When funding rates are high, it indicates that more traders are betting heavily on one side—typically long.
With Thursday’s move, high funding rates signaled that many traders were overleveraged in the belief that prices would continue to rise. When the market moved against them, forced liquidations caused a sharp drop in prices.
Previously, analysts told Decrypt that market participants should be on the lookout for “profit taking” along the way, encouraging them to remember that assets rarely go up in a straight line “forever.”
This follows a surprise Bitcoin jump above the coveted $100,000 level on Wednesday night, with the asset rising to all-time highs above $103,000.
The recent rise in prices of Bitcoin and other cryptocurrencies has been widely linked to Trump’s re-election, fueled by his pro-crypto campaign and promises focused on the industry.
On Thursday, Trump took credit for Bitcoin surpassing the $100,000 milestone, which closely followed his selection for the next Chairman of the US Securities and Exchange Commission (SEC).
Trump has tapped Paul Atkins, a former SEC commissioner, to lead the regulatory agency starting next year. Atkins is seen as a friendlier ally to the crypto industry than the current President, Gary Gensler.
Editor’s Note: Adds Kala’s comments on funding rates.
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