Recently Bitfinex shared a report that stated the largest liquidations in the crypto market since August 2023 amidst the forthcoming BTC ETF approval. With a sudden major decline in BTC price, the third largest liquidation took place but it was soon recovered.
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Largest Liquidation in Crypto Market since August 2023
On January 3, 2024, the cryptocurrency market experienced a substantial round of liquidations, marking one of the most significant sell-offs since August 2023. The decline was attributed to concerns that the United States Securities and Exchange Commission (SEC) might reject all applications for spot Bitcoin exchange-traded funds (ETFs).
According to a report from Bitfinex, BTC’s sharp drop led to the largest wave of liquidations since August 2023, causing long positions to lose $591 million and short positions to lose $94 million.
Bitcoin Price declined
Bitcoin’s value declined by 11% earlier in the month, dropping from $45,400 to $40,400 within a few hours. Although the digital asset swiftly recovered and surged to $47,000, the dip resulted in the third-largest number of long liquidations since the bear market low in November 2022.
Remarkably, this decline coincided with the celebration of Bitcoin’s 15th birthday, known as the Genesis Block. The sell-off was triggered by a report from Matrixport, a crypto-financial service platform, suggesting that the SEC might reject or delay all spot Bitcoin ETF applications. Following this report, over $1.8 billion in open interest positions were liquidated or sold off sharply.
Bitcoin ETF and Crypto Community Optimism
Despite the Matrixport report, experts in the Bitcoin ETF space and the broader crypto community remain optimistic about the applications’ approval this week. The submission of amended 19b-4 filings by applicants on January 5 strengthened the community’s belief that the SEC would soon announce its decision.
Bitcoin has been experiencing a rally driven by hopes for potential ETF approval, concluding Q4 2024 with a substantial 56.5% increase – the third-highest quarterly rise since 2019.
Additionally, long-term BTC holders are strategically positioning themselves in anticipation of price reactions to the potential approval. On December 27, 2023, the Coin Days Destroyed (CDD) metric recorded the fifth-highest value in the past 18 months, indicating deliberate positioning by this cohort of investors.
To conclude, the largest liquidation in the crypto market since August 2023 took place recently due to the sudden drop in the price of Bitcoin ahead of the ETF approval. This was the third largest liquidation but the drop in the price and the market soon recovered. The market optimism is still present towards the ETF approval and the massive bull run that will follow.
Note: It’s a research based article not a financial advice.
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