Bitcoin Plunges 3.5% as Short Selling Triggers $724M Liquidations

The Bitcoin market witnessed a dramatic short-selling cascade on Thursday that drove prices down 3.5% to $107,500, adding over $1 billion in bearish bets within a concentrated timeframe. According to Velo data, the sell-off began with Bitcoin slipping 1.5% from $115,000 in the 90 minutes leading to the major drop, while open interest—representing the total number of unsettled derivative contracts—climbed by 2.3%, adding over $591 million in notional value. This initial movement signaled growing bearish sentiment in derivatives markets before the full cascade unfolded.

Over the next two hours, short selling intensified dramatically, prompting the full 3.5% decline to $107,500 as spot sellers joined the derivatives-driven selling pressure. Open interest climbed an additional 4% during this period, adding another $1.03 billion in exposure to the market. The cumulative volume delta of perpetual futures on offshore exchanges such as Binance and Bybit decreased significantly, while the spot CVD remained steady, providing clear evidence that short perpetual sellers were the primary drivers behind Bitcoin’s decline.

Julio Moreno, head of research at CryptoQuant, confirmed the dominance of short traders in perpetual futures markets, noting that “short traders are dominating in the perpetual futures markets right now, and spot demand is still in contraction based on on-chain data.” This analysis highlights how derivatives activity, rather than fundamental spot market dynamics, drove the sudden price movement that caught many market participants off guard.

The violent price move triggered a massive $724 million liquidation event within 24 hours, with long positions bearing the overwhelming brunt of the damage. Long positions accounted for $536 million of the total liquidations, representing 74% of the total wipeout, indicating that bulls who had levered up in anticipation of continued upward momentum were caught completely off-guard by the sudden reversal. This liquidation cascade created a feedback loop that accelerated the selling pressure as margin calls forced additional position closures.

Amid the derivative-driven chaos, a critical market divergence emerged that revealed underlying market dynamics. While perpetual futures on offshore exchanges showed heavy short activity, spot CVD on U.S.-based exchange Coinbase remained “mostly positive,” indicating consistent buy-the-dip activity from spot investors. The spot bid-ask delta indicator showed increased bid activity, confirming that spot buyers were actively absorbing the selling pressure generated by leveraged shorts, according to CoinGlass data.

This schism between derivatives and spot markets created opposing pressures that defined Thursday’s trading session. Ryan Lee, chief analyst at universal exchange Bitget, explained that “the drop is due to a mix of macroeconomic uncertainty, rising geopolitical tensions, and a spike in liquidations from overleveraged positions.” Lee further noted that any recovery attempts after what market participants termed the “Black Friday” event were met with “profit-taking, adding further selling pressure” that prevented any meaningful rebound.

Market experts expressed cautious views about the immediate future following the significant market flush-out. Anthony Leutenegger, CEO of Aragon, told Decrypt that the crypto market is likely going to need “time to rebalance or find its footing after such a big flush-out.” He added a sobering warning that “as long as macro uncertainty lingers… we might expect continued volatility,” suggesting that the conditions that precipitated Thursday’s sell-off remain largely unresolved.

Despite the apparent buy-the-dip efforts from spot investors on Coinbase, CryptoQuant’s Julio Moreno remains bearish about near-term prospects. Moreno believes the “odds of a rally are tilted to the downside,” indicating that the fundamental market conditions may not support a quick recovery despite the apparent value buying by spot market participants. This perspective suggests that derivatives market sentiment and macroeconomic factors may continue to outweigh spot market accumulation in the short term.

The events of Thursday serve as a stark reminder of the inherent volatility in cryptocurrency markets, particularly when derivatives activity diverges from spot market fundamentals. The $724 million in liquidations and the clear schism between Coinbase spot buying and offshore exchange short selling highlight the complex interplay between different market participants and trading venues. As the market processes this significant flush-out, participants will be watching closely to see whether spot accumulation can eventually overcome derivatives-driven selling pressure or whether continued macroeconomic uncertainty will maintain the bearish tilt that Moreno anticipates.