Bitcoin's Sharp Dip Erases $128 Million in Long Positions as Price Falls Below $90,000

On Thursday, Bitcoin (BTC) faced a sudden and significant flash crash, momentarily dropping to an intra-day low of $89,641 before recovering to trade above $90,000.

Key Takeaways

Bitcoin's price experienced a flash crash, dipping below $90,000 and causing $128 million in long position liquidations.
Recent ETF activity is closely linked to Bitcoin’s price movements.
Analysts believe mechanical market factors and low volume are keeping Bitcoin's price constrained.
Geopolitical factors might influence market conditions positively for Bitcoin.
The upcoming options expirations in January may act as a significant trigger for price movements.

This incident underscores the ongoing volatility present in the cryptocurrency market, leaving many long-position traders unprepared and resulting in considerable liquidations.

Bitcoin Price Dips Below $90,000, Triggering Liquidations of $128 Million in Long Positions

Currently, Bitcoin is trading at $90,431, having briefly fallen under the crucial psychological threshold of $90,000. This marks the first time Bitcoin dropped below this level since January 3, the same day it surged above it, marking the end of a several-week consolidation period.

The sudden drop caught numerous traders off guard, with Coinglass reporting that approximately $128 million in long positions were liquidated as a result. This incident emphasizes the inherent risks leveraged traders face in a tight trading environment.

The sell-off followed significant outflows from U.S. spot Bitcoin ETFs, with SoSoValue data indicating $486 million in net redemptions on Wednesday—this being the largest single-day outflow since November 20.

ETF flows had already taken a downturn on Tuesday, with $243 million exiting during the session following a robust start to the year. This marks a significant contrast to the $697 million in positive flows recorded the previous Monday. This demonstrates how closely Bitcoin’s price movements reflect ETF activity, underlining the influence institutional investment products have on the market.

Market Mechanics and Low Trading Volume Keep Bitcoin Below $100,000

Despite the recent volatility, some analysts urge caution against interpreting Bitcoin's price movements as weakness.

"Bitcoin isn’t weak; it’s mechanically suppressed. Dealer hedging—selling during rallies and buying during dips to maintain neutrality—has trapped the price within a narrow $90K–$95K range, establishing a support level at $90K and resistance at $100K," stated analyst Crypto Rover in a post on X.

Rover also indicated that changes are expected as the month progresses, particularly with the expiration of options later in the month possibly influencing prices. An increase in institutional demand could lead to an earlier breakout.

CryptoQuant’s CEO, Ki Young Ju, shared a similar viewpoint, emphasizing the shifts in market liquidity. He noted a decline in capital inflows into Bitcoin, with liquidity channels diversifying, which make timing inflows less impactful.

“Institutions holding long-term have disrupted the old cycle of whale and retail selling. MSTR isn’t going to offload any significant portion of their 673k BTC. Money has simply moved to stocks and precious metals. I doubt we’ll experience a -50%+ crash from all-time highs like in previous bear markets. It’s likely to be a period of stagnation for the next few months,” he remarked.

Meanwhile, on-chain activity appears subdued. According to analyst Cauê Oliveira from CryptoQuant, trading volumes haven't rebounded to levels necessary for a sustained rally toward $100,000.

“With mixed sentiment and low trading volume in the market, the demand for on-chain movement hasn’t shown solid improvement yet. However, this could change with the end of the holiday season, as many investors begin to trade more actively,” Oliveira noted.

Analysts also highlight broader macroeconomic factors as potential triggers for Bitcoin's behavior. If geopolitical shifts, such as developments in Venezuela, lead to lower oil prices, this may reduce inflationary pressures and lower mining costs, thereby creating a more favorable environment for Bitcoin.

In the near future, Bitcoin is anticipated to remain within a range of $90,000 to $95,000 due to a lack of fresh institutional inflows or supportive macroeconomic conditions.

Thursday’s flash crash highlights ongoing tensions between institutional hedging, retail positioning, and macroeconomic influences in shaping Bitcoin's price.

For many traders, the $100,000 level remains both a psychological and technical target. Still, experts agree that the next significant breakout will be dictated by time and market structure, with mid-to-late January options expirations possibly serving as a catalyst.