Bitcoin Drops 4% to $102K, Triggering $670M in Liquidations Following Weekend Surge to $106K

Overview: Bitcoin surged to over $106,000 late on Sunday, only to retreat nearly 4% by Monday morning. This price fluctuation resulted in liquidations exceeding $670 million in cryptocurrency futures. Nevertheless, Bitcoin exchange-traded funds saw $608 million in net inflows last week, indicating robust institutional demand.

Market Fluctuations

On May 18 at 22:00 UTC, a rapid short covering led Bitcoin to soar to $106,980, marking its peak since February. The increase was short-lived, lasting fewer than five hours. By 02:00 UTC, profit-taking and the light liquidity typical of weekends caused the price to tumble back down to around $103,000. A further drop to $102,300 occurred before buying interest helped stabilize the market to approximately $103,200 by the time London traders began their day.

Data from CoinGlass reveals that this swift price movement led to $670 million in forced liquidations in futures for Bitcoin, Ethereum, Solana, and Dogecoin. Of this, about $465 million in long positions were eliminated, while short positions worth $224 million were squeezed during the initial spike.

The low volume on weekend trading significantly amplified this volatility, highlighted by Sunday being Binance’s least active trading day of the year.

While derivatives traders dealt with losses, spot-Bitcoin ETFs quietly captured a net $607 million during the week ending May 18. BlackRock’s iShares Bitcoin Trust was particularly notable, bringing in $839 million, despite some setbacks from smaller products.

Institutional buyers also participated, with Strategy, the US-based software-to-Bitcoin firm, announcing it acquired 13,390 BTC on Monday at an approximate cost of $1.3 billion, raising its total holdings to 568,840 BTC.

At the same time, the open interest across exchanges surged to a yearly high of $70 billion, signifying an influx of additional leverage into the market that could mirror the second phase of the 2021 bull market.

Economic Pressures

Broader economic news added tension to the crypto uptrend. Moody’s downgraded its outlook on US sovereign debt, causing the 30-year Treasury yield to climb back above 5%, reigniting concerns about fiscal stability.

Researchers at Block Scholes noted to Reuters,

“The latest price movements may begin to affirm the perspective that Bitcoin stands apart from traditional assets in the stock index.”

Martin Leinweber from MarketVector Indexes commented,

“Trust in U.S. assets has been compromised… yet diversification cannot happen instantly.”

The CEO of Stocktwits shared insights on X,

“We’re witnessing a political-economic transformation where Bitcoin plays a crucial role.”

Significance

• Market Sentiment Indicator: Each rise above $100k serves as an immediate measure of market risk tolerance post-April’s halving.
• Supportive Trends: Inflows into ETFs and exposure on corporate balance sheets foster a tendency to buy during dips, helping to contain declines.
• Trading Risks: Weekend markets pose risks for leveraged traders, with thin volumes leading to exaggerated market reactions, both upward and downward.

Future Considerations

1. Monitoring whether inflows into spot-ETFs remain above $500 million weekly; a decline could test the $100k support level.
2. Watching the accumulation of open interest in perpetual futures; increased leverage might trigger another market squeeze.
3. Keeping an eye on US fiscal developments; renewed strains in the bond market could heighten volatility in risk assets.