24-Hour Liquidation of $1 Billion, Is Bitcoin Going to Drop to $70,000?
After a series of hacking incidents and a drastic drop in market sentiment, this morning Bitcoin suddenly flash-crashed, briefly falling below $91,000. In the past 24 hours, there has been a total of $952 million in liquidations across the entire network, with $884 million in long liquidations and $68.5552 million in short liquidations. Furthermore, in the last 24 hours, a total of 316,443 people globally have been liquidated, with the largest single liquidation occurring on Bitmex - XBTUSD worth $10 million.
According to Alternative data, today's cryptocurrency fear and greed index has dropped to 25 (from 49 yesterday), shifting market sentiment from neutral to extreme fear. In recent market action, Bitcoin has experienced multiple sharp short-term drops. Below are the market reasons for Bitcoin's decline as compiled by BlockBeats, provided for readers' reference.
IBIT Massive Liquidation
BitMEX co-founder Arthur Hayes tweeted this morning, suggesting that BTC's flash crash was related to IBIT, a hedge fund. Many $IBIT holders are hedge funds that are long ETFs and short CME futures to earn higher returns than short-term U.S. Treasury bonds.
If the basis narrows as $BTC drops, these funds will sell $IBIT and buy back CME futures. These funds are profitable, and given that the basis is close to the U.S. Treasury bond yield, they will liquidate during U.S. trading hours to realize profits, possibly causing Bitcoin to fall back to $70,000.
Previously, Arthur Hayes had published a blog post anticipating that because there was no fundamental change in U.S. politics due to Trump's reelection, the price of cryptocurrency might fall back to levels seen in the fourth quarter of 2024.
Therefore, Arthur Hayes still believes that Bitcoin will retest $70,000 to $75,000. Only if the Federal Reserve, the U.S. Treasury Department, Japan, or others engage in some form of money printing, or enact specific legislation allowing for permissionless cryptocurrency innovation, can the current market situation improve.
The Bitcoin strategic reserve policy is very poor. "The fundamental problem of governments hoarding any asset is that their buying and selling of assets is mainly for political gain, not financial gain." This policy may change with changes in the political landscape, thus altering Bitcoin's original trajectory.
Related Reading: "Arthur Hayes' New Article: Beyond Bitcoin National Reserves, the U.S. Cryptocurrency Hegemony Has Other Plans"
Delayed Realization of Bitcoin Strategic Reserve Expectations
Trump's plan for a Bitcoin strategic reserve has been slow to materialize, and market confidence continues to erode. In a recent tweet, Arthur Hayes mentioned that the fundamental problem with governments hoarding any asset is that their buying and selling of assets is mainly for political gain, not financial gain. Those building truly decentralized technologies and applications do not have enough financial resources to play politics at this critical juncture. Therefore, the desire for cryptocurrency regulation may come true. If it does, it will appear in an overly complex and prescriptive form, affordable only by large, wealthy centralized companies.
Indeed, on February 21, the probability on Polymarket of "Trump establishing a strategic Bitcoin reserve within 100 days of taking office" dropped to 10%, while on January 20, the day Trump was sworn in as president, the probability had risen to 48% at one point.
The expectations for a BTC strategic reserve have not been fully met. At the national level, Trump has not introduced a bill for a BTC strategic reserve, and he has even been absent from the cryptocurrency market for some time. At the state level, many proposals have been put forward but then rejected.
On February 24, the Montana House of Representatives voted against a proposed bill on February 22 that would have designated Bitcoin as a state reserve asset. The bill proposed to establish a special revenue account to invest in precious metals, stablecoins, and digital assets with a market cap exceeding $750 billion, of which only Bitcoin currently meets this criterion. The bill was opposed by several Republican lawmakers who believed it would lead the state investment board to engage in excessive speculation with taxpayer funds, posing a high risk. Supporters argued that if the bill was not passed, the state government would miss out on the opportunity to enhance returns. The bill is now essentially shelved, and if it is to be reintroduced in the future, it will need to be resubmitted for legislative review.
On February 25, according to Cointelegraph, at a legislative meeting on February 24, the South Dakota House of Representatives Business and Energy Committee decided to postpone consideration of the HB 1202 bill to the "41st day" of the current legislative session. However, the state legislature only has a maximum of 40 days, so this action is equivalent to rejecting the bill, meaning that the state will not include Bitcoin as an official investment option for the time being.
Related Reading:《Arthur Hayes New Article: Beyond Bitcoin Reserve Currency, America's Cryptographic Supremacy Has Another Agenda》
Is the Bull Market Still Here?
On the other hand,
The poor performance of cryptocurrency stocks in the US stock market has also led to risk liquidity being restricted as liquidity has been diverted across various assets including gold, US treasuries, and US stocks, limiting liquidity injection into the Crypto market, where:
Coinbase (COIN) fell 2.7%; Tesla (TSLA) fell 2.66%; Trump Media & Technology Group (DJT) fell 5.59%; MicroStrategy (MSTR) fell 4.73%; MARA Holdings (MARA) fell 5.12%; Riot Platforms (RIOT) fell 4.67%; Hut 8 Corp. (HUT) fell 8.48%
A significant part of the reason may lie in the tariff issue. Although delayed, the Trump administration has stated that it will impose tariffs on Mexico and Canada on time, further strengthening the US dollar's position, thereby bolstering the US dollar index. This has led to the risk of a decrease in sales of the technology seven dragons with high weight in the Nasdaq Index due to tariff expectations, and the risk of liquidity fleeing bursting the AI bubble.
Traders in the market have also presented data from the previous cycle and the cycle before last, indicating that this cycle has not changed its inherent form due to Trump's election. Multiple traders believe that we are currently in the middle of a bull market correction phase, but overall, it is bearish in the short term.
In the 2021 market, Bitcoin ($BTC) fell 56%, Ethereum ($ETH) fell 61%, Solana ($SOL) fell 67%, and many other tokens fell by more than 70-80%. Although there are various reasons that can be used to explain why this cycle is different from the past, the mid-term of the bull market we are currently experiencing actually has historical precedents. Those who believe that the market has entered a full bear market are actually misled.
Everyone needs to remain patient, as the current market environment is very similar to the macro structure of 2017: Bitcoin has experienced five pullbacks, each with a magnitude of over 28%, and most pullbacks lasted 2 to 3 months before seeing new all-time highs. At the same time, other coins (Alts) experienced around a 65% correction. During this stage, the market is filled with various noises and uncertainties. Therefore, we should focus our energy on activities that are more constructive than simply staring at the screen, rather than being troubled by market fluctuations.
Technical analyst @CryptoPainter_X believes:
The current market's short-term trend has some support, but the overall situation is still within a range. After touching the 4-hour sub-demand zone, there may be short-term support, especially when the spot premium is oscillating near the 0 axis without breaking out of the range. Since small support zones within ranges are usually easily broken, attention is needed to see if the previous rhythm continues. If the small support is broken, it may indicate a continuation of the downward range in the oscillation.
Furthermore, the current price is close to the lower limit of the oscillation channel at 91400 (blue line), and the candlestick has not shown a long pin. The short-term rebound strength will determine the next trend. The blue line coincides with the core demand area, theoretically providing short-term support. However, as the channel is about to trend downwards and may turn, the long-term trend still leans towards bearishness, suggesting that the market may face further downward pressure.
Overall, although a short-term rebound may occur, if the midline is not broken or if the range is not breached, the market may still maintain a weakly oscillating trend.
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