As Bitcoin fell to a two-month low, deteriorating market sentiment led to nearly $1.5 billion worth of cryptocurrency being forcibly liquidated over the past 24 hours.
According to data compiled by CoinGlass, this forced deleveraging, where crypto exchanges automatically close out high-risk trades, reached its highest level since February.
On Tuesday, the price of Bitcoin dropped by as much as 7%, falling below $67,000 for the first time since April. Persistent concerns over the Iran conflict and selling activity by major holder MicroStrategy Inc. continued to dampen investor risk appetite. The current Bitcoin price has fallen nearly 50% from its all-time high of approximately $126,000 reached last October.
This decline in Bitcoin coincides with a renewed surge in AI investment enthusiasm injecting momentum into U.S. stocks, coupled with investor hopes for a peace agreement between the U.S. and Iran, driving the stock market higher.
Bitcoin now faces additional headwinds, as two of its traditionally largest sources of demand, including ETFs and the company MicroStrategy led by Michael Saylor, have suddenly become drags on the price.
"This sell-off appears to have been triggered by MicroStrategy's disclosure that it sold 32 bitcoins," wrote Jasper De Maere, an OTC trader at Wintermute. "However, the reality is that even without this headline, the market's upward momentum was fading, and institutional participation we see on OTC platforms is also receding towards lows."
On Monday, MicroStrategy disclosed its first sale of Bitcoin since late 2022, selling approximately $2.5 million worth of Bitcoin from its roughly $59 billion holdings. This move symbolically marks a departure from the company's previously pursued "Bitcoin maximalist" strategy, which helped it become one of Bitcoin's largest buyers.
Although the scale of this sale is negligible compared to MicroStrategy's vast Bitcoin holdings, it occurred at an extremely sensitive moment for the market. Data compiled by Bloomberg shows that U.S. ETFs linked to Bitcoin have experienced net outflows for 11 consecutive trading days, setting a record for the longest such streak. During this period, investors have withdrawn nearly $3.5 billion in total.
James Butterfill, Head of Research at CoinShares, stated that the cushioning effect from progress in U.S. crypto market regulation has been "overwhelmed" by risk-off sentiment stemming from the Iran situation.
"A confirmed daily or weekly close below $70,000 would signal a structural shift in the market, rather than just a reaction to short-term news events," said Sean McNulty, Head of Asia Pacific Derivatives Trading at FalconX.
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