Bitcoin has undergone a significant price drop with a sharp decline of almost 4% in the last 24 hours. This downturn, triggered by ongoing profit-taking, has caused a broader market pullback leading to the liquidation of over $250 million in bullish positions. The price of Bitcoin dropped from $72,500 early Thursday to just above $69,000 by Friday morning, eroding gains accumulated earlier in the week. This decline wasn't isolated to Bitcoin alone; other major cryptocurrencies followed suit, contributing to an overall decrease of 5.5% in market capitalization.
The widely monitored Fear and Greed Index, which tracks sentiment and volatility in the crypto market, indicated "extreme greed" on Thursday. Historically, such a signal often serves as a warning of potential market tops. The index is designed to capture the market's emotional dynamics, pointing out that while extreme fear can signal buying opportunities, extreme greed might herald a forthcoming market correction. By Friday afternoon in Asia, the index adjusted to reflect "greed," suggesting an anticipated further price correction.
The recent price drop has notably impacted futures traders, particularly those with bullish expectations. Data from CoinGlass reported that BTC-tracked futures endured $88 million in losses. Following closely, ether (ETH) futures experienced $44 million in liquidations, while SOL and DOGE futures each recorded nearly $15 million in losses. Interestingly, about 90% of futures bets were bullish in anticipation of elevated prices over the upcoming weekend, coinciding with the U.S. elections scheduled for November 5.
Over recent weeks, global economic policies and political movements in the U.S. seemed to sustain a bullish outlook, with some investors aiming for Bitcoin to hit $80,000 soon. Liquidations, which occur when an exchange forcibly closes a trader's leveraged position due to insufficient margins, often signify market extremes. A surge of liquidations could suggest a market tipping point, prompting a potential price reversal as market sentiment potentially overreacts. This series of events happened just as Bitcoin open interest reached historic highs above $43 billion during the week, only to recede slightly to over $41 billion by early Friday.
