- The Bitcoin liquidation cascade in recent hours saw a robust recovery, with BTC bouncing 6.5% already.
- Timing the bottom of each dip is hard, but it helps to have a plan of action when the dip does arrive.
Bitcoin [BTC] saw a liquidation cascade during the Asia trading session on Friday, the 6th of December. A liquidation cascade occurs when a particularly dense cluster of liquidation levels is tested by the price.
Source: Coinglass
The forced selling activity in recent hours nearly took BTC below $90k. AMBCrypto’s analysis of the liquidation map showed that there were two liquidation cascades in the past few days.
The price spike to $104k occurred after the $100k liquidity cluster was swept. A move to $94k then took out overleveraged bulls, paving the way for the next Bitcoin move driven at a less frenetic pace.
Liquidation cascades- a trading opportunity
Coinglass data showed that at press time the previous 24 hours had seen $883 million worth of liquidations across the crypto ecosystem. Bitcoin saw nearly $493 million worth of liquidations, with $418 million being short.
This occurred after a 12.59% BTC price drop on Binance, with slightly differing values on other exchanges. The move went from $103.5k to $90.5k in the span of seven hours. Yet, the bull run was still a fact, and during bull runs it is common for Bitcoin to see major retracements.
Source: CryptoQuant
During the 2020-21 run, we can see multiple price drops of 20% or more, measured from the all-time high. The recent dip was not as large, and it was already recovering, with BTC prices at $98k at press time.
It was an interesting time to reflect the profits traders could have made, had they bought the major recent price dips.
How much profit would you be in had you bought the recent Bitcoin dips?
Source: BTC/USDT on TradingView
Since the 29th of October, Bitcoin has seen three relatively large price dips, with the largest one being the most recent. As mentioned, different exchanges saw the prices drop to slightly different levels, and the drop was 11.15% on Bitstamp.
The first two drops weren’t liquidation cascades either, which generally happen when the market is highly excitable- like in a bull run when Open Interest hits record highs every other month.
If a trader had used each of these drops and bought $1,000 worth of BTC at the bottom of each of the past three dips, they would be quite highly profitable.
When Bitcoin reaches the $100k mark again, the $3,000 invested during the three most recent dips would be worth around $3,685. It should be noted that much of these gains came after the strong rally following the U.S. presidential election’s results.
Read Bitcoin’s [BTC] Price Prediction 2024-25
A 68.5% return in just over a month sounds good enough for traders just buying the dip. Of course, hindsight is 20/20, and timing the exact bottom is difficult.
Yet, the charts show that, in a bull run, the trend is your friend, and high-conviction investors shouldn’t be scared to buy the dip in the coming months.
