Bitcoin (BTC) has experienced a significant drop, with its value plunging to $91,000 in the early hours of Monday. The decline follows unfavorable macroeconomic developments, including newly imposed US tariffs.
This price movement has left investors and analysts closely scrutinizing the market for signs of a reversal or further downturn. According to a recent analysis by CryptoQuant analyst TraderOasis, Bitcoin’s decline below critical support levels has resulted in increased panic selling.
Despite this, the Coinbase premium index indicates that institutional investors are continuing to accumulate BTC rather than offloading their holdings. This contrast between retail-driven selloffs and institutional accumulation suggests that larger players are using the current dip to boost their positions.
Bitcoin Market Dynamics And Institutional Activity
TraderOasis highlights several key market indicators that shed light on the current dynamics. Open interest—a measure of active trading positions—has dropped significantly, pointing to a wave of forced liquidations as leveraged traders exit their positions. Oasis wrote:
A drop in funding rates suggests that market participants are taking short positions (betting on a price decrease) and that bearish sentiment is increasing.
Notably, this ongoing pattern described by the analyst hints at a strategic accumulation phase by so-called “whales,” or large-scale investors.
Oasis mentioned that while retail traders face stop-loss liquidations, these larger entities appear to be absorbing Bitcoin at discounted prices. This accumulation during periods of panic is not uncommon and often precedes a market recovery.
Rising Liquidations and Signs of Recovery
Another CryptoQuant analyst, Mignolet, echoed these observations, emphasizing the scale of recent long-position liquidations.
The current liquidation volume is reportedly the highest since September 2023, with many traders caught off guard by the abrupt price drop. Mignolet compares this event to past market shocks, including the FTX collapse and the COVID-induced crash.
The market has been cleaned out
“BTC price drop shock has led to the largest liquidation of long positions in recent times… The market has been cleansed, and the open interest trend has finally broken down” – By @mignoletkr
Link
https://t.co/fYs10fAIo6 pic.twitter.com/27znZMRzqs
— CryptoQuant.com (@cryptoquant_com) February 3, 2025
Despite the significant liquidations, there are signs of optimism on the horizon. The Coinbase Premium Gap (CPG) data points to aggressive buying by institutional investors, who are capitalizing on the sudden influx of liquidity. While the market remains volatile, this accumulation activity suggests that larger players anticipate a reversal soon.
Featured image created with DALL-E, Chart from TradingView