Bitcoin Bloodbath: $1.89B Long Positions Vanish as Price Plunges Below $118K – Time to Buy the Dip?

Crypto markets just got rocked—hard. Bitcoin’s nosedive below $118K vaporized $1.89B in leveraged longs in minutes. Was this the flushout before the next rally, or just another Tuesday in crypto?

The carnage in context

Liquidation cascades aren’t new, but this one stung—especially for overleveraged degens who forgot volatility cuts both ways. Exchanges flashed red as stop-losses triggered like dominos.

Who’s left standing?

Spot holders barely blinked (hodl gang stays winning), while perpetual swap traders got a brutal reminder: the market doesn’t care about your leverage preferences. Cue the ‘risk management’ tweets from accounts that were silent during the pump.

The silver lining?

Every crypto crash plants seeds for the next rally. Whether this was the bottom or just a pit stop lower depends on who you ask—and how much dry powder they’re sitting on. Just don’t ask the hedge funds currently recalculating their ‘digital gold’ PowerPoints.

Local Bottom

Such a behavior reflects a swift change in sentiment, from aggressive bullishness NEAR recent highs to a more defensive, risk-off stance. At the same time, cumulative net taker volume dropped sharply by $1.89 billion, a move that is often tied to aggressive selling or the unwinding of late long positions.

Historically, such steep declines have frequently aligned with local price bottoms on shorter timeframes, which suggests that selling pressure may be approaching exhaustion. However, in this instance, the sharp reversal points to capitulation by traders who had entered long positions just before the recent peak.

According to CryptoQuant, traders who entered late long positions and are now underwater are exiting rapidly. This wave of closures is driving down both open interest and net taker volume.

Liquidation metrics add further context. The Net Liquidations 8-hour change, for example, surged to $130 million – primarily from forced closures of overleveraged longs – indicating a classic long squeeze. As prices fell, these liquidations triggered a cascade of sell orders and amplified downward momentum.

Complementing this view is the compression in Binance’s funding rate to 0.006%, which reflects a waning demand to hold long positions and diminished bullish conviction among derivatives traders.

A sharp open interest decline, collapsing net taker volume, heavy long liquidations, and falling funding rates collectively point to a textbook long squeeze, quickly flushing bullish traders from positions as cascading liquidations accelerate the market’s downward momentum.

Beyond the derivatives market, structural signals are also turning cautious.

Structure Turns Bearish

Swissblock noted that bitcoin failed to sustain its upward momentum after briefly reaching a new all-time high of $124.5K. While overall momentum indicators remain positive, the crash has transformed the market structure from bullish to bearish. This shift indicates that, despite underlying strength, sellers are exerting pressure and creating a less favorable environment for extended rallies.

Without a clear “alignment” between momentum and market structure, any rebound attempts could lack the necessary follow-through to hold gains, which makes them vulnerable to quick reversals. In short, the market’s underlying strength is being offset by structural weakness. This raises the risk that near-term upward moves may prove temporary.