Billion-Dollar Liquidation: Bitcoin’s Worst Sell-Off

Elon Musk’s SpaceX in Spotlight: Real News vs. Fake News.

The OG cryptocurrency – Bitcoin – took a nosedive Thursday, causing $1 billion of losses for leveraged traders. BTC/USD dropped to a 2-month low and most of the long positions were liquidated in what is the worst sell-off of the year thus far.

Bitcoin dropped close to $25,000 (on some exchanges), losing more than 7% over the last 24 hours. This generated about $821 million of long positions liquidations, according to data from CoinGlass. Bitcoin bulls took the worst of it, with about $470 million of liquidations, while Ethereum bulls lost about $300 million, according to the same source.

This is the largest liquidation since June 2022, when BTC dropped to $17,000. On Thursday afternoon (U.S. time), this month’s slow and jerky pace transformed into a sharp drop, with “blood in the streets”. Liquidations happen when an exchange (trading platform) shuts down a leveraged trade because the trader fails to meet the margin requirements. This can happen either because they lost a portion or all of their initial deposit (trade goes against them). If a trader cannot satisfy the margin demands or lacks the funds to maintain the trade, it gets closed. When asset values plummet, it can trigger a domino effect of liquidations, amplifying losses and further pushing down prices.

The Culprit: Misinformation

When something like this happens, the immediate question is “Why?” Some attribute the sell-off to “fake news” regarding Elon Musk’s SpaceX and its Bitcoin holdings. A post from Bitcoin Magazine suggested that SpaceX got rid of its $373 million Bitcoin holdings. This post garnered massive attention, racking up over 2.4 million views.

However, the Wall Street Journal (which was the original source of the information) actually reported that SpaceX merely “wrote down the value of Bitcoin it owns” the previous year.

So, SpaceX did not sell its BTC holdings, which means that Bitcoin Magazine dropped the ball and gave us misleading information. As you would expect, this sparked a flurry of angry comments with some criticizing the magazine for propagating “FUD”.

Chart Analysis – BTC/USD

Currently, Bitcoin is changing hands just above $26,000, having recovered a few of the losses incurred a day earlier. As mentioned many times before, a long period of low volatility and range-bound movement is often followed by a breakout and a strong move in the direction of the breakout.

But we must take into consideration that the bearish breakout was triggered by misinformation. So, when that misinformation is refuted, it could generate an opposite reaction. In other words, we may see a climb toward the point where the drop originated. But on the other hand, BTC/USD may become appealing for sellers after a potential recovery.

We shouldn’t rely on what we think others will do and instead focus on the facts. The fact is that the RSI is oversold, which may trigger a bounce higher. However, the Bollinger bands are moving in opposite directions, which in this case indicates bearish momentum.