Key Points
- Bitcoin’s liquidation cascade saw a strong recovery with a 6.5% bounce back.
- Recent dips in Bitcoin’s value could have been profitable for traders who bought at the right time.
Bitcoin recently experienced a liquidation cascade, which is a situation where a dense cluster of liquidation levels is tested by the price.
This forced selling activity almost drove Bitcoin’s price below $90k.
Liquidation Cascades – A Trading Opportunity
Data from Coinglass showed that the previous 24 hours saw $883 million worth of liquidations across the crypto ecosystem.
Bitcoin accounted for nearly $493 million of these liquidations, with $418 million being short.
This followed a 12.59% drop in Bitcoin’s price on Binance, with slightly different values on other exchanges.
Despite this, Bitcoin was still on a bull run, and it is common for Bitcoin to see major retracements during such periods.
Profiting from Bitcoin Dips
Since October 29, Bitcoin has seen three relatively large price dips, with the most recent one being the largest.
These dips were not liquidation cascades, which usually occur when the market is highly excitable, such as during a bull run when Open Interest hits record highs.
If a trader had bought $1,000 worth of Bitcoin at the bottom of each of these dips, they would have seen significant profits.
As Bitcoin reaches the $100k mark again, the $3,000 invested during the three most recent dips would be worth around $3,685.
Much of these gains were realized after the strong rally following the U.S. presidential election results.
While hindsight is 20/20 and timing the exact bottom is difficult, the trend is a trader’s friend during a bull run.
High-conviction investors should not be afraid to buy the dip in the coming months.
