- Bitcoin’s price drop wiped out $600 million in long positions
- It is the biggest liquidation event since the FTX crisis in November 2022
- Prices of the biggest crypto dived under $54,000 per coin, hitting a four-month low
Biggest Liquidation Event Since FTX Fall in 2022
Bitcoin prices dropped sharply on Friday, wiping out as much as $600 million in long positions across market participants. The liquidation event was the biggest one since the FTX collapse in November 2022 when Sam Bankman-Fried’s exchange imploded and left users unable to withdraw their crypto assets.
What are long positions, and what is liquidation? Long positions are bets that the price of a given asset — in this case, Bitcoin — will climb higher. When prices fall, these long wagers that expect the price to increase struggle to keep up and are forced to liquidate, i.e., close out, to prevent further losses in the accounts that hold them.
Bitcoin Hits a Four-Month Low of $53,900
Despite a modest rebound to prices around $55,000 per coin, Bitcoin is still vulnerable. Earlier today, prices dipped to lows around $53,900 — the lowest in four months — on fears that the payouts by defunct exchange Mt. Gox might knock prices left and right.
The Mt. Gox play has narrated crypto moves for over a week. Over the past four days, in particular, the price of Bitcoin has been in a steady decline. The four-day losing streak has washed out about 15% of Bitcoin’s valuation as traders try to assess the current market sentiment and position their portfolios accordingly. It turns out to be a tough job, as the recent liquidations have shown.
What Is Mt. Gox and What Should You Know About It?
Mt. Gox, a Tokyo-based crypto exchange that was active about 10 years ago, suddenly collapsed in 2014, locking up as much as $9 billion in user funds. As users were unable to withdraw their crypto assets, the exchange was tight-lipped about any payouts.
That is, until now. The trading venue has pledged to return as much as $9 billion worth of cryptocurrency to its users. On that note, the selling action is driven by worries that this hefty liquidation could weigh on the upside narrative and pressures prices to the point of a sharp selloff.
Crypto Markets Remain Optimistic Over Long-Term Prospects
Even as the current Mt. Gox-fueled volatility may present trading opportunities, beware of the inherent risks in either direction. Bitcoin is generally a highly volatile asset and can surprise with quick and sharp twists and turns.
Still, crypto enthusiasts remain confident that the long-term projections of the novel asset class remain unscathed. Even if the short-term pain knocks prices, the long-term fundamental picture presents a bright outlook for digital assets.
What’s the Bigger Picture?
Bitcoin reached an all-time high of more than $73,000 earlier this week. However, the upside trend met solid resistance, and the price started subsiding over the past few months. Against that backdrop, the price of the leading crypto asset is down about 26% from its all-time record.
