Bitcoin and the general cryptocurrency market have continued their struggles, as prices took a nosedive this weekend. On Friday, January 31, it seemed like the crypto market was gearing for another slow-action weekend as prices somewhat steadied after Thursday’s bloodbath.
However, the market has completely gone against the trend this weekend, with Bitcoin and the other large-cap digital assets falling by almost double digits on Saturday. Here is a look at the factors behind this steep decline and the immediate outlook for crypto prices.
Why Bitcoin And Crypto Prices Dropped This Weekend
Following Bitcoin’s initial descent to $81,000, different reasons, ranging from geopolitical tensions to the FOMC’s decision to keep the interest rates unchanged, swirled around. However, the continuous decline of prices, even during the typically sluggish weekend, suggests that other factors are at play.
In a new post on the social media platform X, prominent financial markets commentator The Kobeissi Letter weighed in on the possible reasons behind the market-wide downturn in recent days. According to the report, a look at the crypto flow data would shed more light on this market conundrum.
According to The Kobeissi Letter, the recent price decline witnessed by the world’s largest cryptocurrency by market capitalization is completely a liquidity situation. As shown in the highlighted chart, Bitcoin has witnessed three well-defined liquidation waves, summing up to over $1.3 billion over the past day.
The financial markets commentator also mentioned that the crypto market liquidity has been choppy at best lately. However, sustained levels of extreme leverage in the Bitcoin market have caused the formation of “air pockets” in price.
The Kobeissi Letter added:
Couple this with herd-like sentiment, constantly shifting from extreme bullishness to extreme bearishness, and the swings become even more aggressive.
Unsurprisingly, the market-wide price correction saw the market hit with one of the largest liquidation events in crypto history. Market data shows that about $2.5 billion worth of levered longs have been liquidated in the digital asset market over the past 24 hours, the 10th-largest crypto liquidation event ever.
More notably, over $1 billion worth of levered long positions were forcibly closed within 5 minutes, as the Bitcoin price fell to around $76,000 on Saturday.
Total Crypto Market Cap Down By 7%
As of this writing, the total cryptocurrency market capitalization stands at around $2.725 trillion, reflecting a nearly 7% dip in the past 24 hours.
