Bitcoin (BTC) has declined by almost 4% in the last 24 hours after trading at around $72,500 on Thursday and surged slightly above $69,000 on Friday morning. This downward move was triggered by profit-taking, most probably in anticipation of the weekend, and pulled the market significantly back.
Major cryptocurrencies were not spared, with total crypto market capitalization declining by 5.5%. Furthermore, more than $250 million worth of long-leveraged positions were liquidated, signalling caution in the market.
The decline was not limited to Bitcoin alone since other cryptocurrencies also experienced the same drop. This pullback came in the week when the market sentiment was already rising at the beginning of this week, and Bitcoin and most other assets rose. However, the profit-taking that came close to the weekend and expectations in the emerging U.S. elections led to a sharp reversal and subsequent liquidations throughout the futures markets.
BTC-tracked futures alone suffered $88 million in losses, Ethereum (ETH) futures showed a loss of $44 million, while Solana (SOL) and Dogecoin (DOGE) futures both faced around $15 million in further losses, according to data from CoinGlass. More than 80% of these were bullish, with most traders targeting a Bitcoin price of $80 in the coming weeks. Market analysts pointed out that exceptionally high open interest, which has exceeded $43 billion this week, declined to $41,100 as these positions were being liquidated.
In leveraged markets, liquidation occurs when an exchange takes the trader's position and closes it due to the trader's inability to provide enough margin to cover the trade. This leads to even higher volatility. These liquidation pyramids indicate high fluctuations in the short term and possible corrections when the bullish trend weakens.
While prices fell, the widely followed Crypto Fear and Greed Index indicated heightened investor sentiment, flashing "extreme greed" on Thursday, which typically signals a local market top. Historically, extreme greed levels have preceded market corrections, as sentiment often shifts quickly from optimism to caution.
The index, designed to gauge emotional responses in the cryptocurrency market, moved slightly down to "greed" as of Friday afternoon in Asia, but the heightened sentiment still suggests caution. The index uses various data points, including volatility, volume, and market sentiment on social media, to assess overall investor mood. An "extreme greed" reading often indicates a potential downturn, while "extreme fear" can signal buying opportunities.
Market experts suggest that the current sentiment underscores the volatility, especially with recent fluctuations and significant liquidations. The Fear and Greed Index aims to measure market emotion's intensity, signalling that elevated greed may precede further price correction.