Market sentiment toward Bitcoin has turned negative, leading to over $1 billion in cryptocurrency liquidations within just a few hours and pushing Bitcoin's price down to its lowest level in two months.
According to data compiled by CoinGlass, this forced deleveraging, where crypto exchanges automatically close out high-risk trades, has reached its highest scale since February.
On Tuesday, the price of Bitcoin fell by as much as 6%, dropping below $67,000 for the first time since April 5. Persistent concerns over the Iran conflict, combined with selling activity from a major holder, MicroStrategy Inc., have continued to weigh on investor risk appetite. Currently, Bitcoin's price has fallen nearly 50% from its all-time high of approximately $126,000, which was reached last October.
This decline in Bitcoin coincides with a renewed surge in AI investment fervor injecting momentum into U.S. stocks, alongside investor hopes for a peace agreement between the U.S. and Iran, propelling the equity market to continued highs.
Bitcoin is now facing more headwinds, as two traditional major sources of demand, including ETFs and the company MicroStrategy led by Michael Saylor, have suddenly turned into 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 the institutional participation we are seeing on OTC desks is also trending back toward lows."
On Monday, MicroStrategy disclosed its first sale of Bitcoin since late 2022, offloading approximately $2.5 million worth of Bitcoin from its holdings valued at around $59 billion. This move symbolically marks a departure from the company's previously held "Bitcoin maximalist" strategy, which had helped propel it to become one of Bitcoin's largest buyers.
Although the scale of this sale is negligible relative to MicroStrategy's massive Bitcoin holdings, it occurred at an extremely sensitive time for the market. Data shows that U.S. ETFs linked to Bitcoin have now experienced net outflows for 11 consecutive trading days, setting a record for the longest such streak. During this period, investors have withdrawn a cumulative total of nearly $3.5 billion.
James Butterfill, Head of Research at CoinShares, stated that the cushioning effect from progress in U.S. crypto market regulatory legislation has been "overwhelmed" by safe-haven sentiment driven by the Iran situation.
"If a daily or weekly close confirms a break below $70,000, it would signal a structural shift in the market, not just a reaction to short-term news events," said Sean McNulty, Head of Asia-Pacific Derivatives Trading at FalconX.
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