Is Bitcoin Price Crash Done After $1.7 Billion Liquidation Event?

Bitcoin (BTC) price crash on December 9 triggered one of the most massive liquidation events of the year. Roughly $1.7 billion worth of crypto positions were liquidated, leaving altcoins in the dust. Will Bitcoin recover from here or crash lower?

In this article, let’s take a look at technicals, futures data and on-chain metrics to see what Bitcoin might do next. Before that, let’s explore why Bitcoin crashed.

Why Bitcoin Crashed? Will BTC Slide Lower?

During a raging bull run, the leverage present in the ecosystem climbs higher. This is true even in the traditional markets. With cryptocurrencies, this is dialied up to an eleven. As a result, when Bitcoin price slide 6% on late Monday, it caused altcoins to hemmorhage, triggering a flurry of liquidations due to the massive leverage. As a result of this cascade, the total liquidation reached a whopping $1.7 billion, according to data from CoinGlass.

The leverage is one of the key drivers of such a massive crash and liquidation event. However, Google’s announcement of Willow, a quantum chip, could have also added some tailwind to the crash, some speculate.

While Google’s new chip has made a huge step in advancing quantum chips, it is still far away from being a threat to Bitcoin’s encryption. Kevin Rose, former Google employee added,

“Google’s Willow chip, while a significant advancement, comprises 105 qubits. We have a ways to go… Nonetheless, this is a remarkable leap forward in quantum computing”

Bitcoin Price Analysis: Will BTC Recover?

Bitcoin’s four-week upsloping consolidation ended on December 9 after a 6.35% crash. This crash, albiet small, breached the inclined trend line, signaling an end to the consolidation and a potential start to the downtrend.

Currently, BTC sits on the $97,205 support level, a breakdown of which could trigger a crash to $94,875 and $92,514 support levels. While BTC has ended the four-week consoldiation, it is sitll bullish on the short-term. Howerver, a breakdown of $92,514 would flip this bias favoring bears. Regardless, investors need to keep a close eye on $90K, a key psychological level. A bounce here could trigger a recovery rally, but a failure from bulls to defend this level could trigger a steep correction to $86,621

So, will BTC recover? If the $90k to $92.5k support levels hold, Bitcoin price should kickstart a recovery rally.

The Open Interest data shows a decline from $65 billion on December 5 to $60 billion as of December 9. If the OI does not pick up moderately, then recovery bounce is unlikely to sustain.

The 30-day Market Value to Realized Value (MVRV) indicator shows that it is close to zero, suggesting that there are no unrealized profits. While this is a positive sign, it is not a great time to buy yet or expect a recovery. When the 30-day MVRV indicator dips to 6% to 13%, BTC price has reversed.

Hence, the Bitcoin price prediction hints that a short-term recovery is highly unlikely. The data from price chart, open interest, and on-chain metrics all suggest a similar hesitation – a BTC bounce here is not welcome. That said, investors need to be cautious not to FOMO as some altcoins are likely going to fly.