The crypto market witnessed one of its largest liquidations on January 3, 2024, as BTC plunged over concerns that the United States Securities and Exchange Commission (SEC) would reject all applications for spot Bitcoin exchange-traded funds (ETFs).
A report by cryptocurrency exchange Bitfinex revealed that BTC’s fall triggered the largest wave of liquidations since August 2023, with long and short positions losing $591 million and $94 million, respectively.
Largest Liquidations Since August 2023
Bitcoin’s 11% plunge earlier this month saw the asset tumble from $45,400 to $40,400 within a few hours. Although the digital asset made a swift recovery and soared to $47,000 yesterday, the dip resulted in the third-largest number of long liquidations since the bear market hit its low point in November 2022.
Interestingly, the fall happened on the day of the Genesis Block, globally celebrated as Bitcoin’s 15th birthday.
The event was triggered by a report from crypto-financial service platform Matrixport, which suggested that the SEC may deny or delay all spot Bitcoin ETF applications. Following the report, over $1.8 billion in open interest positions were removed through forced liquidations or sharp selling.
Bitfinex said such development was healthy and predictable.
“As indicated in the 2024 outlook special edition of Bitfinex Alpha, we expect the market in the early months of this year to be vulnerable to pullbacks, with increased risk to leveraged longs. It is hard to say whether there will be further pullbacks, but we believe that these are healthy for the market and are a result of overly bullish sentiment being ‘reset’ along with the funding rate,” the exchange stated.
Bitcoin ETF Approval Looms
Despite Matrixport’s report, Bitcoin ETF experts and the crypto community are confident that the applications will be approved this week. The applicants’ submissions of amended 19b-4 filings on January 5 bolstered the community’s belief that the SEC would announce its decision on the products shortly.
Bitcoin has been rallying on hopes of the potential approval, closing Q4 2024 with a 56.5% increase, the third-highest quarterly rise since 2019.
In addition, long-term BTC holders are positioning themselves ahead of price reactions to the potential approval. December 27, 2023, saw the fifth-highest Coin Days Destroyed (CDD) value in the past 18 months, indicating strategic positioning by this investor cohort.
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