On Wednesday, Bitcoin dipped to nearly $108,000, but rebounded above $110,000 on Thursday following a tumultuous trading session that resulted in close to $817 million in leveraged futures liquidations, with long investors bearing the majority of the losses.
This retracement occurred just hours after the Federal Reserve announced a widely anticipated 25-basis-point rate cut. However, Chair Jerome Powell tempered the optimistic mood with cautious remarks indicating that a further cut in December isn’t guaranteed.
Liquidations happen when traders using borrowed capital are compelled to close their positions because their margins dip below required levels. On cryptocurrency futures exchanges, this is an automatic process; when prices shift significantly against a leveraged position, the platform sells the position in the open market to recuperate losses.
Significant clusters of long liquidations can hint at capitulation and potential short-term lows, while considerable short liquidations might signal local peaks as momentum shifts. Traders can also monitor where liquidation levels are densely packed, helping to identify areas of forced trading that may serve as short-term support or resistance.
Data from CoinGlass revealed that approximately 165,000 traders were liquidated within a 24-hour window, which included an $11 million BTCUSD long position on Bybit, marking the largest single loss of the day. Hyperliquid topped all exchanges with $282 million in liquidations, trailed by Bybit’s $223 million and Binance’s $144 million, highlighting the excessive leverage present in the market.
“While the Fed cut interest rates as expected, Chair Powell’s cautious statements led to a sharp sell-off in a ‘sell-the-news’ event after suggesting that the anticipated December cut is not assured,” remarked Nick Ruck, director at LVRG Research, in a note to CoinDesk.
“Despite ongoing short-term volatility, the Fed’s shift towards ending quantitative tightening in December indicates a bullish undertone for risk assets like crypto, positioning Bitcoin and Ethereum for potential upside as cheaper capital flows in over the coming months,” Ruck added.
Jeff Mei, COO at BTSE, noted that the recent dip reflects “cautious positioning across all markets.”
“With inflation still high at 3%, the Fed’s flexibility is limited until there’s more definitive data, especially amid the government shutdown,” Mei stated. “As asset prices are already elevated, further easing is unlikely unless economic shortcomings become more pronounced.”
The wave of liquidations coincides with a period of improving geopolitical sentiment as the U.S. and China have indicated progress toward a new trade agreement.
Even with short-term fluctuations, analysts believe macro conditions are becoming more favorable. If liquidity expands as per the Fed’s plans, Bitcoin could establish a stronger foothold above $115,000 by November, provided leveraged traders don’t get overly aggressive again.
