Bitcoin’s $5B Liquidation Event Sparks Market Uncertainty

The scale of the selloff is stark. According to CoinGecko data, Bitcoin plummeted more than 10% from a weekend high of $84,177 to $75,947. This sharp decline, occurring during a period of typically thin weekend liquidity, triggered a massive $2.56 billion in liquidations on Sunday alone—the largest single-event wipeout in over three months. Since Thursday, total liquidations have exceeded $5.42 billion, data from CoinGlass reveals.

This deleveraging event has effectively hollowed out the market’s speculative foundation. Aggregated open interest across futures markets has plummeted to $24.17 billion, a nine-month low according to CryptoQuant. “The CME gap formed from this move is one of the largest since the March 2020 COVID selloff,” Jeff Ko, Chief Analyst at CoinEx Research, told Decrypt. This gap, a disconnect between spot and futures prices created when the CME market is closed, sits roughly between $77,000 and $84,000, representing an 8% chasm—the fourth-largest since Bitcoin futures launched in 2017.

The gap will likely act as a magnet for traders once volatility subsides, according to Andri Fauzan Adziima, research lead at Bitrue. “It probably won’t close this week with the current pressure, but a bounce could push it toward $84,000 in the next few weeks if we get oversold relief,” Adziima explained. However, Ko cautioned that the timing of any mean reversion will “depend heavily on macro variables such as bond yields and broader risk sentiment.”

The derivatives and options markets have turned decisively defensive in response to the plunge. Bitcoin’s 7-day and 30-day 25 delta skew—a key gauge of sentiment in the options market—dropped below -12% and -8%, respectively, over the weekend. This signals that investors are paying a significant premium for downside protection (puts), a clear shift to risk-off mode. “Traders have switched to defense mode. Futures positions are shrinking, and options show heavy buying of puts,” Adziima added.

Technical indicators are flashing warnings of extreme exhaustion. The Weekly Relative Strength Index (RSI) plummeted to 32.22, suggesting the asset is deeply oversold. However, Adziima noted that the breakdown below the 100-week moving average and the emergence of a “death cross” suggest a more bearish structural shift may be underway. Furthermore, the selloff has pushed Bitcoin below a critical psychological floor: the average cost basis for U.S. spot Bitcoin ETFs, as highlighted by Alex Thorn, Head of Research at Galaxy. This breach follows the second and third-largest outflow weeks ever recorded for these funds.

The decline has also brought Bitcoin perilously close to Strategy’s average purchase price of roughly $76,000, according to Bitcoin Treasuries data. Analyst forecasts for potential support levels vary. While the Bitrue analyst forecasted a $70,000 to $60,000 target, the CoinEx analyst remains more conservative, citing a $68,000 to $70,000 range as a key support zone.

The selloff was exacerbated by a confluence of challenging macroeconomic and geopolitical factors. Experts point to a partial U.S. government shutdown, escalating trade-war headlines, rising long-dated Japanese government bond yields, and geopolitical tensions including the ongoing war in Iran and brewing friction in the South China Sea as key catalysts driving a broader risk-off environment.

This macro uncertainty has left analysts split on the path forward. Some, like CoinEx’s Jeff Ko, describe the current phase as a “healthy deleveraging” rather than a structural bear market. “While volatility is likely to persist through Q1 amid ongoing macro uncertainty, this environment may also present opportunities to accumulate Bitcoin at a discounted price,” Ko said.

Others warn that capital may be rotating away from crypto. Lai Yuen, investment analyst at Fisher8 Capital, suggested that the largest discretionary buyers, such as corporate treasuries, may be “tapped out” for now. “Speculative capital from retail participants has shifted into space stocks, AI, and memory stocks,” Yuen told Decrypt. “There needs to be a reason for capital to rotate back into crypto assets.” This sentiment underscores the challenge Bitcoin faces: it must compete for investor attention in a complex global risk landscape where traditional macro forces are exerting unprecedented pressure.