Bitcoin drop linked to October's $19B liquidation event, analysis finds

Although Bitcoin has fallen by more than $30,000 in two months, cryptocurrency fundamentals remain unchanged, CryptoPotato reported, citing an analysis by the Kobeissi Letter. The analysis points to Oct. 10 of last year as the starting point for the decline, arguing that the liquidation of $19 billion in leveraged positions on that single day fundamentally altered the market structure. Following this event, Bitcoin traded sideways for two months from mid-November to mid-January, but the market remained unstable with repeated bidirectional liquidation gaps. Since Jan. 24 alone, an additional $10 billion in leverage has been liquidated, equivalent to 55% of the forced liquidations seen on Oct. 10. Market depth, the ability to absorb large orders, has also fallen by over 30% from its October high to its lowest level since the FTX collapse in 2022. The Kobeissi Letter suggested that large institutions may have sold off or been forcibly liquidated during the October crash. The analysis predicts that a market bottom will form when a capitulation in both price and leverage coincides with extremely bearish sentiment, a point it believes is not far off.