Bitcoin falls 5% in 3 hours! Market crash: 180,000 people get liquidated, $539 million evaporated.

Bitcoin failed to break through the key resistance level over the weekend, dropping nearly 5% in just three hours on December 1, triggering a market big dump. In the past 24 hours, 180,000 traders in the crypto assets market were liquidated, with total losses reaching $539 million, of which nearly 90% of the liquidation trades involved long positions, primarily focused on Bitcoin and Ethereum. This big dump had no obvious catalyst and was attributed to a sudden surge in dumping volume, leading to a domino effect of selling.

Bitcoin Shock: 4500 USD Flash Crash in Three Hours Without Warning

(Source: Trading View)

The big dump of Bitcoin on Sunday came without warning, which is one of the most terrifying features of a market crash. According to data from Tradingview, the asset traded around $91,500 for most of the weekend, with market sentiment relatively stable, seemingly consolidating at the end of the month. However, on Sunday, it suddenly fell to $86,950 on the largest compliant crypto exchange in the United States, a drop of $4,550, completing about a 5% decline in just three hours.

The Kobeissi Letter pointed out: “As has been seen countless times this year, significant fluctuations in Crypto Assets often occur on Friday nights and Sunday nights.” It also added that this big dump did not have an obvious news catalyst. Such a catalyst-free fall is often more dangerous, as it is driven purely by structural market factors rather than a reaction to specific events.

The core reason for the big dump over the weekend was liquidity exhaustion. During the weekend, large institutional traders and market makers are often not online, resulting in a significant decrease in the depth of the exchange's order book. In this low liquidity environment, even medium-sized sell orders can cause severe price fluctuations. When the first wave of dumping pushed down the price, it triggered a large number of stop-loss and liquidation orders, creating a chain reaction.

Kobeissi attributes the flash crash to “the sudden surge in selling volume, which led to a domino effect of selling, exacerbated by historic leveraged position liquidations.” This domino effect is a typical characteristic of a high-leverage market. When prices start to fall, the first batch of high-leverage longs that reach the liquidation price are forcibly liquidated, and the selling pressure generated by these liquidations further drives down prices, triggering the next batch of liquidations, and so on, until all vulnerable leveraged positions are cleared out.

According to Tradingview data, Bitcoin fell nearly 5% after closing with a green weekly line for the first time in four consecutive weeks, with a closing price of $90,411 this week. This significant weekly level pullback shows that, despite a mid-week rebound, the big dump over the weekend completely erased this week’s gains and even turned into a decline. This trend pattern is referred to as a “false breakout” in technical analysis and often indicates that the trend has not truly reversed yet.

Key Data on Sunday Bitcoin Flash Crash

Fall: From 91,500 USD to 86,950 USD, down 4,550 USD (approximately 5%)

Time: Completed in just three hours

Platform: The largest compliant crypto exchange in the United States has hit bottom first.

Catalyst: No obvious news, purely liquidity driven

180,000 traders liquidated, 90% are long positions slaughtered

The severity of the market crash is evident from the liquidation data. According to CoinGlass, over 180,000 traders have been liquidated in the past 24 hours, with total losses amounting to $539 million, most of which occurred within a few hours of the big dump on Sunday. Nearly 90% of the liquidated trades involved long positions, primarily concentrated in Bitcoin and Ethereum.

The liquidation scale of 180,000 traders is a significant event in the history of Crypto Assets. This means that the average loss per liquidated trader is about $3,000, but the actual distribution is extremely uneven. The liquidation amounts of a few large holders may reach millions of dollars, while a large number of small traders may only lose a few hundred dollars. Regardless of the amount, this collective loss has dealt a severe blow to market confidence.

90% of the long position liquidation ratio reveals the position structure of the market before the big dump. The vast majority of traders hold leveraged long positions, betting on the rise in Bitcoin prices. This one-sided position structure leads to a lack of buying support when the market falls, as potential buyers have already entered the market. When the price starts to fall, these longs not only fail to provide buying support but also become sellers due to liquidation, further exacerbating the fall.

Although the liquidation scale of 539 million USD is large, it is not the highest this year. During the process of Bitcoin falling from its historical high of 126,000 USD, there have been instances of single-day liquidations exceeding 1 billion USD. However, what makes this Sunday’s liquidation special is that it occurred during a period when the market was supposed to stabilize and consolidate, and there was no obvious news catalyst. This type of collapse driven purely by structural market factors is often more difficult to predict and guard against.

From the perspective of liquidation distribution, it is mainly concentrated in Bitcoin and Ethereum. Although these two largest crypto assets have the best liquidity, they are also the most concentrated targets for leveraged trading. Many traders use 10x, 20x, or even higher leverage for trading, and this extreme leverage ratio can be extremely deadly during sharp price fluctuations. A 5% drop in Bitcoin means that a 20x leveraged long position has completely lost, and a 10x leveraged long position has also lost 50%.

The worst November since 2018: Structural issues behind the 17.49% fall

According to CoinGlass data, Bitcoin experienced its worst month of the year, and the worst performance in November since 2018, with a decline of 17.49% that month. In November 2018, Bitcoin fell by 36.57% during a brutal bear market, which was one of the darkest periods in the history of Crypto Assets. Although the current drop of 17.49% is not as severe as in 2018, this level of correction is still shocking in a market that was originally expecting a bull market.

The dismal performance in November stands in stark contrast to the “Uptober” effect. October is usually one of the best-performing months for Bitcoin, and this year is no exception, with Bitcoin hitting an all-time high of $126,000 at the beginning of October. However, the sharp pullback in November erased most of the gains, indicating that the market has not entered a sustained bullish cycle as expected, but instead has fallen into a phase of intense consolidation.

The analysis of the Kobeissi Letter provides a deeper perspective: “The current bear market in cryptocurrencies is essentially still structural. We do not believe this is a fundamental fall.” This judgment distinguishes between structural adjustments and trend reversals. Structural adjustments are caused by excessive market leverage and overcrowded positions leading to technical cleansing, while trend reversals mean that the bull market has ended and the bear market is about to arrive.

If Kobeissi's judgment is correct, then the current market crash is actually clearing the obstacles for the next wave of increase. Excessive leverage and overly consistent long positions are the biggest resistance to the continued rise of the bull market. Only through a sharp correction to eliminate these weak leverages can the market establish a healthier structure, creating space for future increases.

Analyst “Sykodelic” holds a more optimistic view: “This is actually a good start for the month.” He stated that no rally occurred on Sunday, the gap at the Chicago Mercantile Exchange (CME) has closed, and $400 million in long positions have been absorbed. “Downward liquidity has been drained first, which is exactly what we hope to see.”

Technical Significance of CME Gap Closure and Liquidity Washout

The closing of gaps at the Chicago Mercantile Exchange (CME) is an important concept in technical analysis. CME Bitcoin futures do not trade over the weekend, and if there is a gap between the closing price on Friday and the opening price on Monday, a “gap” is formed. Technical analysis theory suggests that these gaps will eventually be filled, as they represent a vacuum in the price discovery process.

The big dump on Sunday just filled the previous CME gap, which is seen as a healthy trend from a technical perspective. Many technical analysts expect that the price will eventually fall back to fill the gap when they see it forming. From this perspective, the drop on Sunday was not entirely unexpected, but rather the market completing a technical correction.

The logic of “downward liquidity is first absorbed” lies in the fact that after clearing out the stop-loss orders and liquidation orders below, the market will become lighter. These potential selling pressures have been released, and there will be less resistance when the market rises subsequently. The absorption of $400 million in long positions means that the market has digested a considerable amount of selling pressure, creating conditions for future rebounds.

However, this optimistic interpretation also carries risks. If the panic triggered by a market crash continues to spread, more investors may choose to stand aside, leading to further depletion of liquidity. The trend after the opening of the Asian and European markets on Monday will be crucial; if it can hold the support near $86,000 and rebound, the big dump on Sunday may just be a brief episode. If it continues to probe downwards or even falls below $85,000, it may open the door to a deeper adjustment phase.