$300M crypto long liquidations — 5 things to know in Bitcoin this week

BTC price action obliterates latecomers betting on continued upside as Bitcoin analysts and miners breathe a sigh of relief.

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Bitcoin (BTC) starts a key week for macro markets with a bump as the weekly close gives way to a sharp 7% BTC price correction.

The largest cryptocurrency broke down toward $40,000 in a fresh bout of volatility, reaching its lowest level in a week.

Arguably long overdue, Bitcoin’s return to test support nonetheless caught bullish latecomers by surprise, liquidating almost $100 million in longs.

The snap move provides a rude awakening for BTC investors at the start of a week, which already holds a multitude of potential volatility triggers. These come in the form of United States macro data that will immediately precede the Federal Reserve’s next decision on interest rate policy.

A bumper collection of numbers coming in swift succession means anything can happen on risk assets — and crypto is no exception.

Fresh from its first downward mining difficulty adjustment in three months, meanwhile, it appears that Bitcoin is finally cooling after weeks of practically unchecked upside.

What could happen before the year is out?

Traders and analysts alike are gearing up for curveballs into the 2023 candle close, and with just three weeks to go, BTC price action suddenly feels a lot less certain.

7% BTC price correction wipes longs

Bitcoin volatility returned immediately after a flat weekend as soon as the weekly close was done.

However, this time, bulls suffered as BTC/USD fell more than 7% in hours to bottom at $40,660 on Bitstamp. This included a 5% drop in a matter of minutes, data from Cointelegraph Markets Pro and TradingView shows.

The sudden downturn, which punctured an otherwise “up only” trading environment, was not the expected outcome for leveraged long traders.

Data from the statistics resource CoinGlass had the long liquidation tally at $86 million for Dec. 11 at the time of writing. Cross-crypto long liquidations for the day stood at over $300 million.

A substantial BTC price correction was already anticipated. Nothing goes up in a straight line, as the popular crypto saying goes, and seasoned market participants were not shy in expressing relief.

“The daily and weekly close was at $43,792. Pullbacks are normal and even healthy. Hourly fluctuations mean nothing,” popular commentator BitQuant told subscribers on X (formerly Twitter) in part of his reaction.

An accompanying chart still predicted new higher highs to come over the course of the week, with $48,000 as the target.

Michaël van de Poppe, founder and CEO of MN Trading, likewise called for calm, especially among frustrated altcoin traders.

“Markets do have corrections and with Altcoins, they’ll be deep as markets are illiquid,” he reasoned.

Over the weekend, DecenTrader founder Filbfilb was among those eyeing potential benefits in a retracement.

“Let’s just be absolutely clear: We have run up massively this year… (from 16k!!) and a correction is due, i would really like that, so this is definitely not a call to buy,” he wrote in an X thread.

Coming after the FOMC decision will be a speech and press conference by Fed Chair Jerome Powell — a classic source of risk asset volatility in itself — followed by more jobless figures the day after.

On-chain data warned on overextended Bitcoin

Following Bitcoin’s flash dip, analysts were keen to flag early warning signs, which could be used to identify similar incoming events.

In an X thread, on-chain analytics platform CryptoQuant drew attention to no fewer than four data sources flashing caution into the weekly close.

Among these was the stablecoin supply ratio (SSR) metric, which at elevated levels shows a broad willingness to rotate out of stablecoins into BTC — a classic sign of potentially unsustainable optimism.

“From January 2023 to December 2023, the SSR (Stablecoin Supply Ratio) has significantly increased. This implies that Bitcoin holds a relatively higher value compared to stablecoins, indicating that market participants attribute greater value to Bitcoin, which has been a driving factor in Bitcoin’s price increase,” contributing analyst Woo Minkyu wrote in one of CryptoQuant’s Quicktake market updates on Dec. 9.

This all comes ahead of April’s block subsidy halving, which will cut the block subsidy by 50%. Previously, DecenTrader’s Filbfilb suggested that miners would thus wish to stockpile BTC before the event, helping positive supply dynamics and even delivering a pre-halving BTC price of $48,000.

Still “going to $48,000 fast?”

Among the short-term Bitcoin bulls, the allure of $48,000 also remains.

Related: Bitcoin wipes nearly a week of gains in 20 minutes, falling under $41K

Over the weekend, this was reinforced by on-chain data, which strengthened the concept that $48,000 could act as a magnetic price target.

Produced by on-chain analytics firm Glassnode, this showed that a “newly identified cluster of addresses” last made a large-volume BTC purchase at an average of $48,050.

Glassnode’s entity-adjusted URPD metric, tracking the average price at which purchases are conducted and their volume, shows this address cluster is responsible for the second-largest purchase yet discovered — 633,120 BTC.

“We going to $48k fast,” X user MartyParty, a popular analyst and host of Crypto Spaces, responded.

DecenTrader meanwhile shows the bulk of leveraged short liquidity lying between current spot price and the $48,000 mark.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.