Bitcoin's Roller Coaster Week

Goood day Lion's I hope you have been safe and well as the year slowly comes to an end and what a time it has been especially just this week with a Roller Coaster ride for Bitcoin.

Bitcoin’s price swings have left many traders especially those betting on bullish outcomes fighting with liquidations this week. Market support appears to be at a tipping point as extreme greed levels in sentiment indicators are showing potential signs of a local top as seen on coinmarketcap.

Lets take a look at some of the news worthy topics that have occurred over the past few days.

Liquidations or Price Correction?

On Thursday Bitcoin saw a dramatic 4% drop from USD 72,500 to just above USD 69,000 leading to nearly USD 250 million in bullish liquidations. The larger cryptocurrency market followed suit shedding 5.5% in total value.

According to CoinGlass data Bitcoin-focused futures incurred 88 million in losses followed by liquidations in Ethereum (ETH), Solana (SOL), and Dogecoin (DOGE) futures, which collectively lost millions as well. Nearly 90% of all futures positions were bullish, indicating that traders largely expected Bitcoin’s upward trend to continue.

Liquidations, particularly of this scale often signal a volatile market period. When exchanges close traders' leveraged positions due to insufficient margin, a price reversal becomes more likely, especially if the liquidations trigger an overreaction in market sentiment. Market data also indicated that Bitcoin’s open interest, a metric tracking active futures contracts, reached record highs earlier in the week before decreasing on Friday.

Institutional Momentum vs. Retail Caution

Bitcoin’s latest price surge toward 72,000 has largely been driven by institutional demand. Retail traders on the other hand are sitting out this rally most likely spooked by 2024’s unpredictable market conditions.

Data from exchanges like Coinbase reflect this divergence. Coinbase reported lower than expected revenue in the third quarter driven in part by slumping retail trading.

Retail traders, traditionally a backbone of crypto market volume, have recently scaled back, particularly as they face price volatility and fewer high-yielding opportunities. Coinbase’s recent earnings report showed a quarterly drop in revenue, due to softened retail activity and challenges in its subscription and services division.

Meanwhile Crypto.com experienced a record breaking October with USD 139 billion in trades, reflecting increased demand from institutional players. In contrast, Coinbase’s revenue forecast for Q4 fell to a range of USD 505 million to USD 580 million reflecting the challenges of low retail participation and the declining interest rates that had once made yield-generating products attractive.

This growing retail institutional divide comes as Bitcoin’s price movements are less volatile than in previous cycles. According to data from Volmex, Bitcoin volatility has decreased by 40% from 2020 to 2024. Largely due to the rise of institutional involvement and regulatory developments like spot Bitcoin exchange-traded funds (ETFs).

Turbulent Years End

So as you can see much of this half of the year has been quite shakey no doubt all to do with the current U.S election and the state of the economy. Things will probably settle once the election ends and markets regain confidence in the political sphere.

image sources provided supplemented by Canva Pro subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.

Posted Using InLeo Alpha