Bitcoin Price Declines Amid Long Squeeze

Bitcoin (BTC) saw a price drop of over 3% in the last 24 hours, now trading at $63,714, due to a “long squeeze” in the perpetual futures market, as reported by CryptoQuant.

This increase in bitcoin long liquidations coincided with investor caution regarding potential interest rate hikes from the Bank of Japan (BoJ).

“Bitcoin perpetual futures market data shows that there was a long squeeze in recent hours, as long liquidations spiked,” said CryptoQuant’s Head of Research, Julio Moreno. A long squeeze occurs when the price of an asset falls, forcing traders with leveraged long positions to sell or risk liquidation to meet margin requirements. This can further escalate selling pressure, leading to more margin calls and liquidations, exacerbating the price drop.

Bitcoin Long Liquidations Spike

In the past day, around 64,838 traders have been liquidated, totaling $181 million across centralized exchanges, per Coinglass data. Bitcoin led liquidations with nearly $49 million, most of which came from long positions.

On Sunday, CryptoQuant analysts observed increased speculation in the cryptocurrency futures market, noting that open interest—the total value of outstanding contracts—reached about $19.1 billion. Since March 2024, open interest surpassed $18.0 billion six times, each instance preceded by a price decline.

“The futures market shows signs of overheating,” the analysts stated.

Japan’s Leadership Change Sparks Caution in Global Markets

Last Friday, Japan’s ruling party selected Shigeru Ishiba as its next prime minister, raising the prospect of shifts in monetary policy. Ishiba supports potential interest rate hikes by the BoJ, aligning with central bank governor Kazuo Ueda’s stance.

Expectations of future rate hikes have led to caution in global equity markets, moderating a recent risk-on sentiment. Investors are apprehensive about a repeat of the yen carry trade unwind from late July, which caused bitcoin’s sharp drop from $70,000 to below $50,000.

Ishiba’s appointment renewed the yen’s appreciation, but Japan’s Nikkei 225 Index fell 4.8%, the steepest drop in eight weeks. This trend affected global equities, with the S&P 500 and Dow Jones Industrial Average dipping lower, despite the Dow reaching a record high. Conversely, China’s Shanghai Composite surged over 8% following new stimulus measures implemented by Beijing.