Bitcoin is going to be okay: Take a look at the data

Takeaways from the conference:

• Bitcoin’s price drop on Friday shows that the volatility of spot BTC ETFs continues, and leverage is increasing losses.

• As portfolio margin systems broke down, the liquidations reached $5 billion. This highlights risks associated with illiquid assets.

• Bitcoin derivatives show that traders are still cautious amid low liquidity, insolvency reports, and Monday’s US National Holiday, which led to partial market closing.

BitcoinBTCThe price of Bitcoin (BTC) dropped by 16,700 dollars on Friday. That’s a 13,7% drop in just eight hours. In BTC, the sharp fall to $105,000 erased 13% of all futures interest. These figures, despite the large losses and escalating liquidations are not unusual for Bitcoin.

The word excludes the “COVID crash” — an impressive 41.1% intraday plunge on March 12, 2020 — which may have been amplified after the leading Bitcoin derivatives exchange at the time, BitMEX, faced liquidation issues Bitcoin has experienced 48 more days of even greater corrections than the 15-minute interruption.

On Nov. 9, 20,22, Bitcoin experienced a 16.1% correction intraday, plummeting to $16,590. The episode was a coincidence with the FTX collapse, which grew after a report showed that almost 40% of Alameda Research assets were linked to FTX native token FTT. Sam Bankman Fried’s conglomerate stopped withdrawals shortly after, and ultimately filed for bankruptcy.

The volatility of Bitcoin remains high, despite the ETF market maturation

Some might argue that the number of intraday crashes exceeding 10% has decreased since the introduction of spot Bitcoin exchange-traded fund The ETF will be launched in the United States on January 20, 2024. Still, considering Bitcoin’s historical four-year cycleIt may be premature for us to declare that volatility has really eased. The market structure has also changed as the trading volume on DEXs increased.

These events include an intraday fall of 15.4% on Aug. 5 2024, as well as a 13.3% corrective correction on Mar. 5, 2024 and a drop of 10.5% just two weeks after the debut date for spot ETFs in January, 2024. The $5 billion of Bitcoin futures sales on Friday suggests that the market could be months, or years away from stabilizing.

Hyperliquid, a perpetual decentralized exchangeThe company reported that bullish positions worth $2.6 billion were forcedly closed. Binance traders, among others, have also reported difficulties with margin calculations. DEX users also complained of auto-deleveraging which happens when counterparties do not meet margin requirements.

Even traders who were sitting on substantial gains had some of their positions terminated unilaterally, causing major issues for those who use portfolio margin instead of isolated risk management. The exchanges are not to blame for this situation, nor is it evidence of fraud. This is the result of using leverage and relatively illiquid market. Altcoins fell by up to 40%, which led traders to lose their collateral.

Bitcoin/USDT perpetual futures Trading was about 5% lower than BTC/USD Spot Prices during the Crash and has not yet recovered to levels before. Normal, these discrepancies present market makers with easy profit opportunities. However, something is preventing the return of normal conditions.

Related: Crypto.com CEO calls for probe into exchanges after $20B liquidations

The crash on Friday was a clear disruption. However, the low liquidity during the weekend could be blamed, particularly since US bond markets were closed Monday due to a holiday. Rumors of bankruptcy could also have been a factor, leading market makers to avoid taking on additional risks.

It may take a few days before the Bitcoin derivatives market can fully assess the damages and traders are able to decide whether $105,000 will be a support level or if there is upcoming correction.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. These are solely the opinions, views, and thoughts of the author and may not reflect the opinions and views of Cointelegraph.