It’s evident that the recent surge in liquidations has ended the bullish trend for cryptocurrencies. Bitcoin dropped to around $60,000 late on Thursday, following a more than 50% decrease from its peak in October.

Iconic price shifts occurred in merely 24 hours, where Bitcoin tumbled from $77,000 to $60,000, marking one of the starkest daily declines since its inception. Many altcoins suffered heavier losses, with XRP contributing to a significant portion of the total wreckage, which amounted to $2.6 billion in liquidated positions, affecting nearly 600,000 traders.

Despite a slight bounce from the lows, both Bitcoin and altcoins have reverted to levels last seen before the end of the US presidential elections in 2024. Analysts are left to ponder the reasons behind such drastic moves; a recent report from the Kobeissi Letter offers some insights.

What Triggered the Crash?

Analysts have expressed that despite Bitcoin’s substantial drop of over $30,000 in the past two months, the underlying fundamentals of the crypto market remain largely intact. However, they attribute this market downturn to a pivotal event on October 10, when an unprecedented $19 billion in leveraged positions was wiped out. According to them, this shift appeared indicative of a structural change in the market dynamics.

“Looking back at October 10th gives clarity to the ongoing turmoil in crypto markets. The all-time high before the crash was defined on October 6th, just four days prior to the major downturn.” — The Kobeissi Letter

Previous periods of Bitcoin trading exhibited considerable stability between mid-November and mid-January, punctuated by notable liquidations reaching concerning levels. The current sentiment seems heavily influenced by developments stemming from the October crash.

Further evidence of the market’s crisis was illustrated by selling pressure across various asset classes, crucially affecting Bitcoin’s market depth. The situation mirrors patterns noticed post the FTX crisis in 2022.

So, When Will We Hit the Bottom?

After such crashes, a common inquiry revolves around whether the market has reached its lowest point or if further declines loom ahead. Analysts assert that Bitcoin’s bottom will be established when “structural liquidity is restored,” requiring a mixture of price capitulation, leverage adjustments, and peak bearish sentiments. Interestingly, they note that we might be approaching this crucial juncture.

“The current cycle of liquidations and deteriorating sentiment has been quite vicious. Since January 24th, a staggering $10 billion in leveraged positions has gone, which is about 55% of the massive clear-out witnessed on October 10th. There’s evidently a structural decline taking place.” — uncredited analysis

For detailed breakdowns, stay tuned as we’ll continue to explore the evolving dynamics within the cryptocurrency landscape.