Bitcoin, $15 Billion Liquidation Bomb...Both Trading Volume and Buying Speed Down

▲ Bitcoin (BTC)/AI generated image

Bitcoin (BTC) continues its upward trend, but within the derivatives market, the risk of a massive long position liquidation is increasing. Approximately $15 billion worth of leveraged long positions have accumulated below the current price, while the short position liquidation volume above is only about $3 billion, causing the market structure to lean heavily towards downside liquidity.

According to NewsBTC on May 7 (local time), crypto trader Max Trades analyzed Bitcoin liquidation data, stating that approximately $15 billion worth of long position liquidations are concentrated below the current price. He explained that an extreme imbalance has formed in the Bitcoin market, where the volume of long liquidations significantly exceeds that of short liquidations.

The remaining short position liquidation volume above the current price is approximately $3 billion. This represents a 5-to-1 difference compared to the long liquidation volume. NewsBTC reported that this structure significantly tilts the market towards downside liquidity, creating a high-risk environment where even a small price drop could trigger a chain of liquidations.

Despite this, Bitcoin continues to show an upward push. NewsBTC explained that the recent rally has been sustained by new short position inflows and short liquidations. However, it pointed out that if short positions no longer provide upward fuel and market makers start to focus on the dense liquidity below the price, Bitcoin could become vulnerable to a rapid liquidation cascade.

Analyst Kaz noted that Bitcoin's trading volume has started to decrease. While the perpetual futures Cumulative Volume Delta (CVD) continues to rise, the buying speed has noticeably slowed down. The spot CVD is also rising, indicating that actual spot demand is supporting the rally, but recent candles show weakening momentum.

Kaz believes that the current trend of Bitcoin slowly rising amid decreasing trading volume, weakening momentum in Cumulative Volume Delta, and flat open interest increases the possibility of a short-term correction. He explained that making hasty decisions based on the current movement is not appropriate, and future changes in open interest and spot Cumulative Volume Delta will provide clearer direction.

NewsBTC reported that with volatility remaining in the market mid-week, Bitcoin could still turn bearish. It analyzed that even if Bitcoin rises further before the New York market opens, the possibility of a sharp drop after the New York market opens increases if there is no significant support from open interest and spot demand. At the time of writing, Bitcoin was trading at $81,064.

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