Bitcoin Long Liquidations Hit $150 Million In 3 Days As BTC Price Falls Towards This Key Resistance Level

Leveraged long positions in the Bitcoin futures market have been “straightened out” (ie stopped out in internet parlance) in recent days.

According to data presented by crypto derivatives analysis website coinglass.com, long position liquidations have crossed $150 million in the past three days.

In fact, Bitcoin’s 10% drop over the past three days from the mid-$30,000s to current levels in the low $27,000s marks one of the most intense periods of long liquidation since the beginning of the year.

Selling pressure accelerated earlier this week when BTC price broke below key support in the $29,000 area in the form of 1) the 21DMA, 2) a late-March uptrend, and 3) the late-March highs.

Since this bearish break, technicians have targeted a retest of support in the $26,500-800 range in the form of a support-turned-resistance level from March and the 50DMA.

Why Is Bitcoin Down This Week?

The macro developments may partially explain Bitcoin’s drop for the week, which is now at just 10% (for reference, this would be Bitcoin’s worst weekly drop since the FTX debacle in November).

Survey data from the US has painted a mixed picture of economic momentum in the US, muddying the waters on expectations for the economic outlook, as well as the prospect of further Fed tightening.

This, combined with much warmer than expected UK inflation data, has pushed US interest rates higher on the week, typically negative for non-yielding crypto assets such as Bitcoin.

Some analysts have pointed to ongoing uncertainty regarding the regulatory situation in the US, another factor weighing on crypto, with SEC Chairman Gary Gensler’s appearance before Congress earlier this week adding little certainty to the outlook.

Meanwhile, the adoption of landmark crypto regulations in the EU did little to boost sentiment.

Indeed, this week seems to have been dominated by 1) profit taking after a very strong start to the year which has led to 2) liquidation of a large number of overly optimistic/greedy bulls who expected Bitcoin to plow above $30,000.

The Bitcoin market is cooling down

In fact, a number of calculations last week flashed that the Bitcoin market may have overheated in the short term as the BTC price hit new 10-month highs above $30,000 last week.

The 14-day relative strength index had risen above 70, signaling an overbought market. It has now fallen to around 42, and if Bitcoin’s fall extends to $25/26,000, it could soon signal an oversold market.

Meanwhile, BTC’s rolling 30-day yield had also risen to its highest level since late November.

The prospect of a continued decline towards support in the $25,200-400 region as further optimism dissipates is certainly on the table for the coming days/weeks.

But it shouldn’t do too much damage to the long-term bull market thesis, and could be an excellent entry point for the long-term bulls to get back into the market.

As noted in an article on Thursday, the 25% delta bias of short-term Bitcoin options has turned negative, but the bias of long-term options continues to lean positive.

confidence in Bitcoin’s long-term price outlook makes sense when considering macro factors, on-chain trends, and medium to long-term technical indicators.

While there is still considerable uncertainty about how many times the US central bank will raise interest rates and when it will start cutting them, one thing seems certain – the end of the Fed’s tightening cycle appears to be near as US inflation and economic growth slow.

This means that unfavorable changes in financial conditions are unlikely to return as a major headwind to the crypto markets in 2023, as was the case in 2022.

Meanwhile, Bitcoin will likely continue to gain tailwinds from key recent technical developments, including 1) Bitcoin’s spectacular pullback from the 200DMA and realized price in mid-March and 2) Bitcoin’s “golden cross” (when the 50DMA crossed the 200DMA) in early February.

Elsewhere, a number of indicators on the chain and the market cycle are screaming that last year’s low marked the end of the crypto bear market. Many investors will still be confident that Bitcoin’s 2023 bull market will stay alive.

As such, you can expect bargain hunters and dip buyers to be eagerly waiting on the sidelines to jump in whenever Bitcoin posts significant price drops, just as was the case in mid-March.