$300M crypto long liquidity – 5 things to know in Bitcoin this week
Bitcoin (BTC) begins a key week for macro markets as the weekly close gives way to a 7% BTC price correction.
The biggest cryptocurrency fell to $40,000 on fresh volatility, hitting its lowest level in a week.
Arguably long overdue, Bitcoin's return to testing support has surprisingly wiped out latecomers by nearly $100 million in long-term holdings.
The momentum move will provide a rude awakening for BTC investors at the start of the week, which already holds many volatility triggers. These come in the form of US macro data ahead of the Federal Reserve's next decision on interest rate policy.
A series of numbers coming in quick succession means anything can happen to a risk asset – and crypto is no exception.
Fresh from its first downward correction in three months, meanwhile, bitcoin appears to be finally cooling off after weeks of practically being unproven.
What can happen before the end of the year?
Traders and analysts are gearing up for a twist to the 2023 candle close, and with just three weeks to go, BTC's price action is suddenly feeling confident.
7% BTC price correction wipes out longs
As soon as the week closed, Bitcoin volatility bounced back after a flat weekend.
However, this time, bulls were hurt as BTC/USD fell more than 7% within hours to $40,660 on Bitstamp. This includes a 5% discount in a few minutes, data from Cointelegraph Markets Pro and TradingView.
The sudden collapse, which resulted in an “up only” trading environment, was not the expected outcome for long traders.
CoinGlass had $86 million in long-term liquidity as of December 11, according to data from Statistic Resources. Crypto long liquidity for the day reached over $300 million.
A significant BTC price correction is anticipated. According to the popular crypto saying, nothing goes in a straight line, and experienced market participants are not shy to express relief.
“The daily and weekly close was at $43,792. Pulling is normal and healthy. Time fluctuations mean nothing,” noted analyst BitQuant said in part in a response to subscribers on X (formerly Twitter).
The accompanying chart still predicts a new high for the week, with a target of $48,000.
Michael van de Pop, founder and CEO of MN Trading, specifically called for peace among disgruntled altcoin traders.
“Markets have corrections and with Altcoins, markets become illiquid,” he explained.
“Don't be nervous. Bitcoin's momentum is slowly coming to an end, with Ethereum easily dominating the next quarter.
Most of the top 10 cryptocurrencies by market cap followed BTC/USD down, not recovering much to remain down 4-6% over the past 24 hours.
Ahead of the volatility, trading group DecenTrader noted that finance rates were gaining momentum – a familiar sign of preparedness for volatility.
#Bitcoin funding levels were flat during the move up to $44k, but are now picking up as the price goes sideways.pic.twitter.com/QzjDKBA1K4
— Decentrader (@decentrader) December 11, 2023
Over the weekend, DecenTrader founder Filbfilb was among those looking at the potential benefits of the restructuring.
“Let's be absolutely clear: we're up significantly this year…(over 16k!!) and it's about to correct, I'm excited, so this is definitely not a call to buy,” he wrote. X thread.
“The deep food-inspired fix is great and overdue.”
A return to lower levels, particularly $25,000, is “so low that it would take some kind of global crisis to happen,” Philp said.
The Fed's FOMC meeting headlined a tough macro week
The coming week will feature an unusual pattern for US macro data releases.
The Consumer Price Index (CPI) and Producer Price Index (PPI), which will be released in November, will hit on December 12 and 13, respectively – the same day the Fed decides on interest rate changes.
Despite their general importance, the previous data releases are too late to influence policy directly, but the Fed has several other releases that show inflation is slowing.
The exception came last week, when unemployment data showed that restrictive financial conditions still aren't helping the labor market as much as planned.
However, the road map for markets is clear – no change in Federal Open Market Committee (FOMC) rates this month, but a cut in mid-2024. According to data from CME Group's FedWatch Tool, that forecast is 98.6 percent unanimous.
“The Fed's most recent statement was that rate cut expectations were ‘premature,'” financial opinion source Kobeisi Letter wrote in a commentary on the X Weekly Macro Calendar post.
“This week, we expect the Fed to reinforce that.”
Key events this week:
1. November CPI inflation data – Tuesday
2. OPEC monthly report – Wednesday
3. November PPI inflation data – Wednesday
4. Federal level decision and statement – Wednesday
5. Retail sales data – Thursday
6. First unemployment claims – Thursday
Flexibility is…
— Kobeissi Letter (@KobeissiLetter) December 10, 2023
After the FOMC decision will be Fed Chairman Jerome Powell's speech and press conference – itself a source of risk asset volatility – followed by more unemployment the next day.
On-chain information has warned against overextended Bitcoin
Following Bitcoin's flash dip, analysts are eager to point out early warning signs, which can be used to identify similar revenue events.
In the X thread, on-chain analytics platform CryptoQuant drew attention from no less than four data sources that were cautious about the weekly close.
Among these is the Statcoin Supply Ratio (SSR) measure, which at elevated levels shows widespread demand to switch from the stablecoin to BTC – a sign of unsustainable optimism.
From January 2023 to December 2023, the SSR (Stablecoin Supply Ratio) increased significantly. This indicates that Bitcoin has a relatively high value compared to stablecoins, indicating that market participants place a greater value on Bitcoin, which is the reason for Bitcoin's price increase.” Contributing analyst Woo Minkyu wrote in one of CryptoQuant's Quicktake market updates in December. 9.
“However, historically, some investors have shown a preference to convert Bitcoin to a stable coin, citing the possibility of a short-term price correction in Bitcoin.”
A day earlier, co-founder Gaah said that more than half of the current BTC supply was profitable compared to the buy point before the correction.
“This indicator has indicated the distribution of the local high or the main peak of Bitcoin at each historical moment when it entered this field,” he warned.
Supply is up almost 90% this month, in percentage terms, after Bitcoin's all-time high in November 2021.
Crisis flooding provides miners with “welcome relief.”
The recent Bitcoin mining crisis correction has been highlighted by months of new all-time highs.
Coming just before BTC's price plunge, the biweekly correction puts roughly a 1% risk, according to data from BTC.com.
This marked the first downward adjustment since early September, and the first change since then that did not result in additional competition for block grants.
While initially giving pause for thought, for James Van Straten, a research and data analyst at crypto insights firm CryptoSlate, there's nothing to worry about.
“The first negative correction for Bitcoin since September is a welcome relief for miners. That ends six consecutive positive corrections,” he responded on X.
Cointelegraph reports that miners have seen both intense competition, increased hardware deployments, and increased fee income from on-chain scripting.
I believe we are at the beginning of a #Bitcoin bull run.
Mining earnings are starting to break above the 365DMA, which happened during the previous bull runs. Miners are flying, the ETF acts as an additional incentive. Another reason why stock prices will continue to rise pic.twitter.com/5TltWkGIAv
— James Van Straten (@jimmyvs24) December 8, 2023
All of this comes before the block subsidy halving in April, which will reduce the block subsidy by 50%. Earlier, DecenTrader's Filbfilb suggested that miners would want to stockpile BTC ahead of the event, helping to create positive supply dynamics and a pre-halving BTC price of $48,000.
Still wondering, “Will it go fast to $48,000?”
Among short-term Bitcoin bulls, $48,000 remains attractive.
Related: Bitcoin wipes out nearly week-long gains in 20 minutes, falls below $41k
Over the weekend, this was reinforced by chain data, which reinforced the theory that $48,000 could serve as a magnetic price target.
Produced by on-chain analytics firm Glassnode, this shows that a “new set of known addresses” last bought a large amount of BTC for an average of $48,050.
The Glassnode entity's adjusted URPD metric, tracking the average price at which purchases are made and their volume, shows that this address cluster is responsible for the second largest purchase ever – 633,120 BTC.
“We're going 48k faster,” responded X user MartyParty, a popular analyst and host of Crypto Spaces.
DecenTrader meanwhile shows the largest leveraged short liquidity between the current spot price and the $48,000 mark.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
