Bitcoin Faces Major Liquidation Wave, Echoing Past Market Crashes

• Bitcoin faces record liquidations surpassing the FTX collapse, fueling extreme fear and market uncertainty.
• Crypto Fear & Greed Index hits lows echoing past crashes, but history suggests rebounds often follow extreme fear phases.
• Major liquidations trigger sell-offs but also create long-term buying opportunities as Bitcoin historically recovers from downturns.

Crypto analyst Mikybull data shows Bitcoin markets witnessing a massive liquidation event surpassing even the FTX collapse in scale. This has led to a shift in sentiment with Crypto Fear & Greed Index decreasing to historical lows. This event has sparked speculation on whether further declines are ahead or if a market bottom is forming.

Major Liquidations and Market Impact

According to recent data, long Bitcoin liquidations have risen sharply on all exchanges. The rise in liquidation is similar to other disaster scenarios, such as the blowups of Celsius, FTX, and Three Arrows Capital (3AC). Such events previously led to spectacular price drops in Bitcoin followed by a prolonged recovery phase.

This time, the price fluctuations indicate an early 2025 peak above $90K before witnessing a significant drawdown. The liquidation volume reflects heightened volatility, forcing traders into massive sell-offs. Moreover, these liquidations typically coincide with extreme fear levels in the market.

Crypto Fear & Greed Index Signals Extreme Fear

Besides liquidation statistics, the Crypto Fear & Greed Index also indicates a sharp decline in sentiment. The index, which tracks investor sentiment, has dropped to extreme fear levels recorded during the March 2020 crash and following FTX. The extreme sentiment reversal is reflective of confusion among traders, which can be a bottoming indicator.

However, past trends indicate that such extreme fear phases have historically preceded strong price rebounds. As seen after previous crashes, Bitcoin has shown resilience by recovering and pushing toward new highs.

Market Implications and Future Outlook

Large liquidations often drive Bitcoin’s price action by increasing forced selling pressure. This pattern has played out in every major correction, creating buying opportunities for long-term investors. Additionally, Bitcoin’s historical performance suggests that extreme fear phases tend to mark the end of downturns rather than the start.

Consequently, market participants remain divided on whether more pain is ahead or if a reversal is near. If history repeats itself, Bitcoin could see a recovery once selling pressure eases. However, sustained fear-driven sell-offs could lead to further downside before a true bottom forms.