Bitcoin Market in Chaos: $500 Million in Liquidations and Manipulation Allegations

Massive Liquidation Wave Hits Both Sides of the Market

The Bitcoin market has experienced an exceptionally volatile trading day, with liquidations totaling $500 million ^[1]. The losses hit both sides of the market: long positions worth $350 million and short positions amounting to $150 million were wiped out ^[1].

The trigger for the violent price movements was the US inflation data for November. The Consumer Price Index (CPI) recorded one of the largest monthly declines since 2023 and came in significantly below expectations ^[3]. The annual inflation rate for November stood at 2.7 percent, after having been at 3.0 percent for the twelve months through September ^[3]. Instead of the expected 3.1 percent, inflation came in lower by a "massive amount," as crypto trader Daan Crypto Trades noted ^[3].

Short-Lived Breakouts as Trap for Traders

The Bitcoin price briefly jumped above the $89,000 mark following the release of inflation data ^[1]. However, the breakout proved to be a trap: within 30 minutes, the price crashed and liquidated leveraged positions worth $140 million ^[1].

Total liquidations within 24 hours reached over $630 million ^[3]. A similar picture of structural instability had already emerged the day before: within just two hours, the total market capitalization of the crypto sector fluctuated by a remarkable $140 billion ^[1].

Allegations of Market Manipulation

The unusual price movements have led to speculation about targeted market manipulation. The co-founder of analytics firm Glassnode is now openly speaking of "manipulation" ^[1]. The price is trading directionlessly in a wide range and systematically working through liquidity zones, flushing traders out of the market in droves ^[1].

Crypto trader Ted Pillows recognized similarities to the beginning of the year and posed the question: "$BTC is imitating the Q1 2025 fractal. What if this continues?" ^[3]. His chart analysis suggested another macroeconomic bottom, similar to early April when the pair briefly fell below $75,000 ^[3].

Structurally Unstable Market Situation

A current report from analytics platform Glassnode underscores the frustration of many investors ^[1]. Bitcoin remains trapped in a structurally unstable range. The recent rejection at just under $93,000 and the subsequent decline to $85,600 illustrate the persistent oversupply in the market ^[1].

Demand in the spot market is described as selective and short-lived ^[1]. There is a lack of coordinated accumulation to sustainably catch the price pullbacks. Volumes at the major trading venues are stagnating ^[1].

Conditions for a Trend Reversal

Analysts cite clear conditions for a trend reversal: either sellers must capitulate above $95,000, or a massive influx of new liquidity is needed to absorb the supply and reclaim important technical levels ^[1].

Despite the turbulence, the Bitcoin price continues to hold above the important support level of $86,100 ^[2]. The $86,000 level is likely to become the line in the sand for bulls ^[2], while falling US inflation numbers could reduce selling pressure in the short term ^[2].

The probability of another interest rate cut at the Fed meeting on January 28 stands at 26.6 percent according to CME Group's FedWatch Tool ^[3].