Bitcoin Faces $57K Liquidation Risk as Demand Stays Weak, Analyst Warns

Bitcoin (BTC) has extended its recent decline, struggling once again to break through the $65,000 psychological threshold after multiple failed attempts at the level. The repeated rejections at this zone come during a period of historically low volatility for Bitcoin, with the asset trading in a relatively tight range as macroeconomic uncertainty and shifting expectations around Federal Reserve rate policy continue to influence risk-asset sentiment.

Even as some market participants express optimism about a potential broader rally, analyst Joao Wedson has cautioned that the risk of a deeper pullback remains significant. Wedson pointed to liquidation levels below $57,000 as a key concern, noting that unliquidated long positions concentrated in that region could trigger a cascading liquidation event and push Bitcoin's price lower. In cryptocurrency derivatives markets, liquidation cascades occur when forced selling triggered by price declines hits leveraged long positions, automatically closing them and intensifying downward pressure — a dynamic that can amplify price moves well beyond what spot market activity alone would produce.

Wedson drew a parallel to a similar pattern observed in 2022, when Bitcoin plunged one final time — dropping below $16,000 in November of that year — before establishing its cycle bottom. That final flush was preceded by the collapse of crypto exchange FTX, which sent shockwaves through the market. Wedson believes a similar capitulation sequence could repeat in the current market environment.

Despite these warnings, Wedson maintained that such a scenario could also present a compelling entry point for investors. He noted that large liquidation events have historically served as some of the best opportunities to accumulate an asset, given the strong probability of a subsequent market rebound.

Spot Market Demand Remains Subdued

On-chain data suggests that demand for Bitcoin is not yet strong enough to sustain a bullish rally. Accumulation has remained thin over an extended period, with spot market netflows falling well below the levels typically seen during bull-market conditions.

Over the past 30 days, Bitcoin's spot netflow recorded negative $412 million, indicating net accumulation as coins moved off exchanges. However, this figure remains modest by historical standards. Over the past 50 days, net outflows peaked at only negative $1.10 billion — a level that pales in comparison to outflows observed during prior bull runs.

Minimal accumulation of this magnitude signals a limited appetite for buying Bitcoin, a dynamic that is typically absent when an asset is in a genuine bull-run phase.

Over the past 15 days, Bitcoin netflows totaled positive $182 million, reflecting net sell-offs as assets shifted onto exchanges. Negative netflows indicate net buying, with coins leaving exchanges, while positive netflows point to heavier selling pressure.

Exchange Balances Continue to Climb

A more pressing concern is the rising balance of Bitcoin held across exchanges. At the time of writing, Exchange Reserves have trended higher, with the total BTC balance on exchanges reaching 2.71 million coins at the latest reading.

An increase in Exchange Reserves typically signals that traders are moving Bitcoin onto trading platforms, positioning the asset for potential sale. Higher exchange balances generally reflect a growing readiness among holders to sell.

Taken together, the combination of thin spot accumulation, modest net outflows, and rising exchange reserves keeps Bitcoin exposed to further downside in the near term — even as the prospect of a liquidation-driven reset looms as a potential catalyst for the next major move.

Source: CryptoNews.net