Bitcoin (BTC USD) price pushed to new historic highs earlier this week, and this was accompanied by record high levels of open interest.
This meant that the king of the crypto world grew increasingly sensitive to the derivatives market, and that showed in its retracement on Tuesday.
Bitcoin price dropped from the day’s high at $124,000 to the day’s low at $121,216 on Wednesday.
In recent Bitcoin news, according To Glassnode, large traders had positioned themselves to take advantage of any potential bearish market outcome by executing short positions.
The latest surge in short positions was the highest observed in more than 2 months.
A clear sign indicative of rising bearish expectations, after Bitcoin price experienced an aggressive bullish move in the first week of October.
It was also worth noting that this retracement occurred after open interest pushed into new highs above $94 billion.
This made Bitcoin price action more susceptible to manipulation and liquidation events.
Whales Take Profits But Also Trigger Spike in Long Liquidations
The spike in short positions indicated that whales were heavily involved in price manipulation. CoinGlass revealed that Bitcoin experienced roughly $441 million worth of net outflows on Tuesday.
In recent Bitcoin news, the market collectively experienced more than $1 billion worth of sell pressure on Tuesday, which may have triggered FUD among holders.
This setup created the right conditions for a leverage shakedown. Liquidation data revealed that more than $119 million worth of long positions were liquidated on Tuesday.
This figure would have been higher but the recent Bitcoin price highs may have spoofed some traders with leveraged longs into a more cautious approach, causing many of them to close their positions.
Despite Tuesday’s dip, large order book data showed that whales also bought back the dip. This indicated that they might be interested in keeping the cryptocurrency from extending its downside.
This outcome may indicate that whales were interested in pushing the price higher.
Perhaps the big question now is whether this latest leverage shakedown will give way to more upside or set BTC up for more downside.
Sustained Institutional Demand Fuels Bitcoin (BTC USD) Price Confidence
In Bitcoin news on Tuesday, the retracement in price may have been because the price was overheated after its aggressive rally in the first week of October.
However, it was also worth noting that whales and institutions have been front‑running the rally.
Heavy whale and institutional demand hardly focus on short‑term gains. Instead, Bitcoin tends to extend its upside for a few weeks to months when smart money is deeply involved.
Interestingly, institutions still maintained positive Bitcoin flows on Tuesday despite the price decline. This was mostly courtesy of Blackrock, which acquired $875 million worth of Bitcoin on 7 October.
Bitcoin ETF flows maintained 7 business days of consecutive positive flows. The fact that whales also bought back in the last 24 hours also underscored a potential trap for short sellers.
The number of short sellers has been rising in the last 24 hours. Roughly $4 billion worth of shorts might be liquidated if Bitcoin jumps back above its latest ATH.
Moreover, the latest market sentiment indicated rising expectations that the Bitcoin price could rally above $200,000 before the end of the year.
It was still some ways off from that target at its latest peak. Speaking of sentiment, market sentiment surged as high as 70 earlier this week.
This meant that there was still more potential upside before the Bitcoin (BTC USD) price enters extreme greed territory, where it will be considered overheated.