Introduction
Bitcoin faced a severe market test as over $650 million in crypto liquidations swept through derivatives markets within 24 hours, with Bitcoin positions accounting for more than 40% of the total. The sell-off, which pushed Bitcoin below $72,000 for the first time since November 2024, has been fueled by long-term holders trimming exposure as the digital asset’s performance lags behind traditional inflation hedges like gold. This downturn has reignited investor concerns and prompted analysts to question Bitcoin’s short-term narrative as a reliable protective asset amid macroeconomic uncertainty and shifting Federal Reserve expectations.
Key Points
- Bitcoin liquidations reached $272 million within 24 hours, contributing to over $650 million in total crypto liquidations amid derivatives market stress.
- Long-term holders are reassessing positions as Bitcoin underperforms gold, challenging its short-term narrative as a reliable inflation hedge.
- Analysts highlight a potential test of the $60,000 level if corrective pressure continues, comparing the current phase to past reset periods like 2018 or 2022.
A Wave of Liquidations and a Key Narrative Under Pressure
Data from CoinGlass reveals the scale of the recent market stress: total crypto liquidations over the past day jumped to above $654 million. Bitcoin accounted for a dominant 41% of that figure, equating to approximately $272 million in forced position closures. This intense selling pressure has driven Bitcoin’s price down to around $71,400, a 6% drop on the day and a nearly 43% decline from its all-time high of $126,080 recorded on October 6, according to CoinGecko. The move below the $72,000 level marks a significant technical and psychological breach for the market.
According to Georgii Verbitskii, founder of the crypto investment app TYMIO, the selling appears to be “driven largely by long-term holders reducing exposure.” This shift in behavior is linked to a critical short-term challenge for Bitcoin: its perceived role as an inflation hedge. “One of Bitcoin’s core narratives—that it reliably protects against fiat inflation—is being questioned in the short term,” Verbitskii told Decrypt. He highlighted a concerning divergence, noting that “while gold and other metals continue to rise, Bitcoin has moved in the opposite direction, and that divergence matters.” This underperformance has led some steadfast investors to reassess their allocations, temporarily weakening confidence in Bitcoin’s inflation-hedge proposition.
Macroeconomic Catalysts and the Path to Potential Further Losses
John Haar, managing director at Swan Bitcoin, contextualized the drawdown as a “common” trait for the volatile asset, reminding investors that “it was less than four months ago that Bitcoin hit a new all-time high of $125,000.” He affirmed that “nothing has changed the long-term Bitcoin investment thesis.” However, Haar attributed the broader sell-off to specific macroeconomic headwinds, including geopolitical tensions, the flushing out of leveraged traders, and a major political development: former President Donald Trump’s nomination of Kevin Warsh to chair the Federal Reserve. This potential shift in U.S. monetary policy leadership has added a layer of uncertainty to the market.
The confluence of these factors has analysts warning of continued downside risk. Verbitskii noted the downtrend “leaves room for further downside,” suggesting that “if this corrective wave continues, a move toward the $60,000 area can’t be ruled out.” He framed such a scenario as resembling “past reset phases like 2018 or 2022 rather than a continuation of a strong uptrend.” This perspective underscores a market bracing for a potentially prolonged period of consolidation and correction, moving away from the euphoric momentum that characterized its previous rally.
Analyst Perspectives: Oversold Signals and a Patience-Required Phase
Market observers point to the unwinding of excessive leverage and uneven flows into spot Bitcoin ETFs as key pressures preventing a swift recovery. Ryan Yoon, senior analyst at Tiger Research, described the situation as “clearly unfavorable,” stating that “Bitcoin is reacting negatively to both macro tailwinds and headwinds, appearing increasingly sidelined.” However, Yoon offered a note of technical optimism, adding that Bitcoin has “entered oversold territory” and that “its value as an alternative asset will shine once liquidity explicitly flows back into the market.” He cautioned, however, that “February is expected to be a challenging month.”
The path to stabilization, according to analysts, requires patience. Vincent Liu, chief investment officer at Kronos Research, told Decrypt that falling below $72,000 “doesn’t break the more bullish thesis, but it extends the unwind and pushes the market into a patience required phase rather than immediate continuation higher.” Liu suggested the sell-off could “fade” under specific conditions: as leverage “compresses without further downside, ETF outflows slow, and spot demand absorbs supply.” Signs of a positive shift, he noted, would include leverage stabilizing and prices holding firm during future sell-offs or negative news cycles. For now, the market consensus points toward a necessary period of consolidation before downside risks ease and conditions stabilize for Bitcoin’s next move.
📎 Related coverage from: decrypt.co
