- Bitcoin recorded its largest short liquidation of the year, a move that preceded a market rally.
- Liquidity inflow in the market, although high, could soon face major outflows.
Bitcoin [BTC] has been majorly bullish, taking a 3.19% rise in the past 24 hours, which helped it set a new weekly high of $107,106 within this period.
This shows the strong potential for Bitcoin to set a new all-time high, especially with liquidity inflows from market investors. However, the asset faces a major challenge.
Bitcoin hit record liquidation
Bitcoin on Binance recorded its largest short liquidation yet over the past 24 hours, as sentiment quickly shifted.
Short liquidation is an event that forcefully closes the positions of traders betting on a price decline, triggering their stop loss as the price trades higher.
In this case, it followed Bitcoin’s sharp move from a low of $103,195 to $105,535, a 3.48% jump. In total, these short traders lost $66.3 million within this period.
Short liquidation tends to open the door for further market rallies, as it indicates likely new capital inflow into the market, fueling momentum.
Source: CryptoQuant
AMBCrypto’s analysis found that the liquidity inflow into the market has likely come from traditional institutions investing in Bitcoin.
Per the latest report, 10 Bitcoin spot exchange-traded funds (ETFs) saw a combined net inflow of 2,103 Bitcoins, worth $210.67 million.
BlackRock’s iShares contributed 1,250 Bitcoins to the total inflow, bringing its total Bitcoin holdings to 633,212, worth $66.28 billion.
A trend like this—particularly at the start of the week—is a healthy sign that traditional investors are rotating capital back into Bitcoin as they regain confidence.
The continuation of this trend could broaden market infrastructure, with traditional institutions investing in crypto and retail and whale investors shifting as well.
Is a major roadblock ahead
While Bitcoin is making moves to the upside, market analysis shows that not all sentiment aligns with that path.
The Binary Coin Days Destroyed (CDD)—which tracks when investors last moved their Bitcoin to determine whether they’re selling or buying—shows the former is the case.
Source: Cryptoquant
This is confirmed as the CDD currently has a reading of 1, implying that investors may be moving their tokens to sell.
AMBCrypto’s further analysis revealed that investors are likely moving their Bitcoin because new market data suggests it is overbought.
An asset becomes overbought when it crosses the 70-line mark (colored red) on the chart, meaning its current market price is far higher than its intrinsic value.
Source: Glassnode
What typically follows after a period at this level is the asset trending lower.
With this insight, investors are likely realizing profits to avoid future losses, giving them a chance to re-enter at a more favorable level ahead of another rally.
