Bitcoin's Record High and Rapid Crash: A Tale of Profit and Liquidation
Summary:
Bitcoin's value briefly soared to a record high of $69,000 on March 5 before experiencing a rapid decline, attributed to significant selling from long-term Bitcoin holders cashing in their profits. This led to over $1 billion in leveraged positions being liquidated. Despite this, 45% of all Bitcoin hasn't been moved in over three years, suggesting many are still holding onto their assets. Bitcoin's value has since rebounded, with it now sitting just 4% below its peak.
On March 5, the price of Bitcoin reached an unprecedented high of $69,000. This peak was brief as the cryptocurrency experienced a rapid drop, momentarily falling below $60,000. This sudden downswing in value was the result of significant selling from long-term Bitcoin owners, with numerous larger accounts and inactive wallets emerging in order to cash in on their profits. Records from CryptoQuant showed that the preceding three days had seen Bitcoin inflows totalling $525 million moved to crypto exchanges, indicating that users were transferring their Bitcoin from unconnected storage in order to take a profit following this record high price. One notable instance involved an owner of Bitcoin who, after 14 years of inactivity, deposited 1,000 BTC ($67.1 million) onto Coinbase at the point when Bitcoin was valued at $67,116. These coins were originally mined in 2010 when Bitcoin was valued at less than $0.28, meaning that this long-term holder has made over $60 million in profit. On the other hand, those leveraging their assets were not so fortunate, with more than $1 billion of leveraged positions being liquidated due to these fluctuations in price, representing the largest liquidation since the last cyclical peak. Bitcoin also witnessed record daily selling volumes on Coinbase, indicating significant selling activity. Nonetheless, not all are choosing to sell. Data from CryptoQuant shows that 45% of all Bitcoin has not been moved in over three years, while 11% has remained untouched for between five and seven years. Some analysts view this rapid fall in price as beneficial for the market overall by clearing out highly volatile positions and recalibrating excessive funding rates. These rates demonstrate the disparity between futures and spot markets, with high rates signifying an overly optimistic market controlled by long traders. Despite this abrupt drop, Bitcoin's value has since rebounded above $66,000, now sitting just 4% below its all-time high.
Published At
3/6/2024 11:00:33 AM
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