24-Hour Liquidation: $1.3B, Is Bitcoin Headed to $70,000?

BUBBLEand others2Authors

2025-02-25 11:01

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After a series of hacking incidents and with the market sentiment hitting rock bottom, Bitcoin suddenly flash crashed this morning, briefly dropping below $91,000. In the past 24 hours, a total of $1.333 billion was liquidated across the entire network, with long liquidations amounting to $1.248 billion and short liquidations totaling $84.775 million. Additionally, in the last 24 hours, a total of 364,747 people globally were liquidated, with the largest single liquidation occurring on Binance - BTCUSDT worth $20.7963 million.

According to Alternative data, today's cryptocurrency fear and greed index has dropped to 25 (from 49 yesterday), shifting market sentiment from neutral to extreme fear. In recent market action, Bitcoin has experienced several sharp short-term declines. Below are the market reasons for Bitcoin's drop compiled by BlockBeats, for readers' reference.

IBIT Mass Liquidation

BitMEX co-founder Arthur Hayes tweeted this morning, suggesting that the BTC flash crash is related to IBIT's hedge fund. Many $IBIT holders are hedge funds that are long ETFs and short CME futures to earn higher returns than the short-term U.S. Treasury bonds they have invested in.

If the basis trade declines as $BTC falls, these funds will sell $IBIT and buy back CME futures. These funds are in a profitable state, and given that the basis is close to the U.S. Treasury bond yield, they will liquidate during the U.S. trading session to realize profits, causing Bitcoin to potentially fall back to $70,000.

Previously, Arthur Hayes had published a blog post anticipating that due to no fundamental changes in the U.S. politics following Trump's election, the price of cryptocurrency might fall back to the level of the fourth quarter of 2024.

Therefore, Arthur Hayes still believes that Bitcoin will retest $70,000 to $75,000. Only if the Fed, the U.S. Treasury, Japan, or other countries print money in some form or enact specific legislation allowing for permissionless cryptocurrency innovation, can the current market situation be improved.

The Bitcoin Strategic Reserve Policy is very poor. "The fundamental problem of government hoarding any asset is that their buying and selling of assets is mainly for political gain rather than financial gain." This policy may change with changes in the political landscape, thereby altering Bitcoin's original trajectory.

Bitcoin Strategic Reserve Expectation Fails to Materialize

Trump's plan for a Bitcoin strategic reserve has been slow to materialize, eroding market confidence. In a recent tweet, Arthur Hayes mentioned that the fundamental problem of government hoarding any asset is that their buying and selling of assets is mainly for political gain rather than financial gain. And those who are building truly decentralized technologies and applications do not have enough resources to play politics at this critical juncture. Therefore, the desire for cryptocurrency regulation may come true, and if it does, it will appear in an overly complex and prescriptive form, affordable only by large, wealthy centralized companies.

Indeed, on February 21, the probability on Polymarket of "Establishing a strategic Bitcoin reserve within Trump's first 100 days in office" once dropped to 10%, while on January 20, the day Trump was inaugurated as president, the probability had risen to 48%.

The expectation of a BTC strategic reserve has not been fully realized. At the national level, Trump has not introduced a bill for a BTC strategic reserve; he has even been absent from the cryptocurrency market for some time. At the state level, many proposals have been put forward but have been rejected.

On February 24, the Montana House of Representatives voted against a proposed bill on February 22 that would have designated Bitcoin as a state reserve asset. The bill proposed the establishment of a special revenue account to invest in precious metals, stablecoins, and digital assets with a market cap exceeding $750 billion, with only Bitcoin currently meeting this criterion. The bill faced opposition from several Republican lawmakers who believed it would allow the state investment board to engage in excessive speculation with taxpayer funds, posing too much risk. Supporters argued that failure to pass the bill would cause the state government to miss out on opportunities to boost returns. Currently, the bill has been shelved, and if it is to be reintroduced in the future, it will need to be resubmitted for legislative review.

On February 25, according to Cointelegraph, during a legislative session on February 24, the South Dakota House of Representatives Commerce and Energy Committee decided to postpone consideration of HB 1202 to the "41st day" of this legislative session. However, the state legislature only has a maximum of 40 days, effectively rejecting the bill, indicating that the state will not include Bitcoin as an official investment option for the time being.

Is the Bull Market Still On?

On the other hand, the performance of cryptocurrency-related stocks in the US stock market has been poor, leading to multiple constraints on risk liquidity. Liquidity has flowed from the crypto market to assets such as US stocks, gold, and US bonds, restricting capital inflows into the crypto market. Market expectations are also reflected in on-chain data. Specifically, Coinbase (COIN) is down 2.7%; Tesla (TSLA) is down 2.66%; Trump Media & Technology Group (DJT) is down 5.59%; MicroStrategy (MSTR) is down 4.73%; MARA Holdings (MARA) is down 5.12%; Riot Platforms (RIOT) is down 4.67%; Hut 8 Corp. (HUT) is down 8.48%.

A significant part of the reason may lie in the delayed tariff issue. The Trump administration has declared that it will impose tariffs on Mexico and Canada on time, further strengthening the US dollar's position, thereby boosting the US dollar index. Due to the tariff expectations, there is a risk of a decrease in sales volume for the technology "Big Seven" with a high weight in the Nasdaq index, leading to liquidity outflows and the risk of bursting the AI bubble.

Market traders have also brought out data from the previous cycles and the cycles before that. The data show that this cycle has not fundamentally changed due to Trump's election. Multiple traders believe that we are in a pullback phase in the bull market, but the outlook is generally bearish in the short term.

cburniske believes that the current market scenario is similar to that of 2021 and that this bull market cycle is not fundamentally different from the previous one. Data indicate that we are actually in the mid-term of the bull market:

During the same period in 2021, Bitcoin ($BTC) dropped by 56%, Ethereum ($ETH) by 61%, Solana ($SOL) by 67%, and many other tokens saw declines of over 70-80%. Although there are various reasons that can be used to explain why this cycle is different from the past, the mid-term of the bull market we are currently experiencing does have historical precedence. Those who believe that the market has already entered a full bear market are actually misled.

@RaoulGMI then made a horizontal comparison with the BTC macro structure of 2017, suggesting that we will likely experience a new all-time high after a 2-3 month consolidation:

Patience is key as the current market environment mirrors the macro structure of 2017: Bitcoin went through five corrections, each exceeding 28%, with most corrections lasting 2 to 3 months before reaching a new all-time high. At the same time, altcoins corrected by approximately 65%. During this phase, the market is filled with noise and uncertainty. Therefore, we should focus on activities that are more constructive than just staring at the screen, and not be troubled by the market's fluctuations.

Technical analyst @CryptoPainter_X believes:

There is some short-term support in the current market trend, but the overall situation remains within a range. After touching the 4-hour minor demand zone, there might be some short-term support, especially when the spot premium is oscillating near the 0-axis and has not fully broken out of the range. Since small support zones within a range are usually easily breached, it is important to watch whether the previous rhythm continues. If the minor support level is broken, it could signal a continuation of the downward oscillation.

Furthermore, the current price is close to the lower limit of the oscillation channel at 91400 (blue line), and with no long wick candle, the strength of any short-term rebound will determine the next trend. The blue line aligns with the core demand zone, theoretically providing short-term support. However, as the channel is about to descend and possibly turn, the long-term trend remains bearish, indicating the market may face further downward pressure.

Overall, although a short-term rebound is possible, if the midline is not broken or the range is not breached, the market is likely to remain in a weak oscillating trend.