Bitcoin Flash Crashes Amid $1 Billion Liquidations: Is a Drop to $70K Imminent?

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In recent market movements, Bitcoin (BTC) has experienced a sharp downturn, briefly dipping below $91,000 amid a wave of liquidations and shifting investor sentiment. Over the past 24 hours, more than **$952 million in leveraged positions were wiped out across crypto markets, affecting over 316,000 traders globally. Long positions bore the brunt, accounting for $884 million in losses, while short liquidations totaled around $68.5 million. The largest single liquidation occurred on BitMEX’s XBTUSD futures contract, valued at $10 million**.

This sudden volatility coincides with deteriorating market confidence. According to the Fear & Greed Index by Alternative.me, crypto market sentiment has plunged to 25 — signaling "extreme fear", down from 49 just a day earlier. With technical triggers, macro speculation, and fading regulatory hopes converging, many investors are questioning whether Bitcoin is poised for a deeper correction — possibly toward $70,000.

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IBIT ETF Unwinding Sparks Sell-Off?

One prominent theory behind Bitcoin’s flash crash comes from Arthur Hayes, co-founder of BitMEX. In a recent tweet, Hayes pointed to potential unwinding activity in IBIT, BlackRock’s spot Bitcoin ETF.

Many hedge funds holding IBIT shares employ a basis trading strategy: going long on the ETF while shorting Bitcoin futures on CME. This allows them to capture the spread between ETF price and futures premium — often yielding returns higher than short-term U.S. Treasury rates.

However, when Bitcoin’s price drops, this basis narrows. As the arbitrage opportunity shrinks, funds may exit their positions to lock in profits — especially if the yield advantage over Treasuries disappears. Hayes suggests that such profit-taking during U.S. trading hours could have triggered cascading sell orders, amplifying downward pressure on BTC.

“If the basis collapses and offers no edge over T-bills, smart money exits. That’s what we’re seeing now,” Hayes noted.

This dynamic may explain not only the sudden dip but also the broader market structure vulnerability during periods of low liquidity or heightened uncertainty.

Fading Hopes for U.S. Bitcoin Strategic Reserve

Another factor weighing on market psychology is the delayed rollout of a national Bitcoin reserve policy under the Trump administration.

Back in January, when Donald Trump was inaugurated, Polymarket odds suggested a 48% chance that the U.S. would establish a strategic Bitcoin reserve within his first 100 days. However, as of late February, those odds have plummeted to just 10%, reflecting growing skepticism.

Trump himself has been largely silent on crypto matters recently, and state-level efforts to adopt Bitcoin as a reserve asset have stalled:

Critics argue that exposing taxpayer funds to volatile digital assets poses unacceptable risks. Supporters counter that failing to act could mean missing out on long-term yield enhancement opportunities.

Arthur Hayes remains skeptical about government-led adoption:

“The fundamental problem with governments stockpiling assets is that they trade for political gain, not financial sense. That distorts natural market dynamics.”

Without clear regulatory support or institutional buying momentum, investor enthusiasm has cooled.

Market Rotation: From Crypto to Gold and Treasuries

Beyond sentiment and policy delays, capital is visibly rotating out of crypto-linked equities and into safer assets.

Major Bitcoin-related stocks saw significant declines:

These drops suggest that institutional and retail investors are de-risking portfolios amid uncertainty. Liquidity is shifting toward traditional safe havens like gold, U.S. Treasuries, and even large-cap tech stocks — a trend reminiscent of mid-cycle corrections seen in prior bull runs.

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Is This Just a Mid-Cycle Pullback?

Despite the bearish short-term outlook, some analysts believe this correction fits the pattern of a healthy bull market consolidation.

Crypto trader cburniske compared current conditions to early 2021 — a period marked by volatility following rapid gains. While sentiment is fragile now, historical data shows similar fear phases occurred before strong rallies later in the cycle.

Key observations:

Most traders agree: we’re likely in a mid-bull market correction, not the start of a bear phase. But short-term pain may persist until macro clarity returns.

Core Keywords Integration

Throughout this analysis, several key themes emerge that align with high-intent search queries:

These terms reflect both informational and transactional search intent — from users seeking explanations for price moves to those evaluating investment timing and risk exposure.

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Frequently Asked Questions (FAQ)

Why did Bitcoin drop below $91,000 suddenly?

The flash crash was likely triggered by a combination of factors: hedge funds unwinding profitable IBIT-CME basis trades, reduced expectations for U.S. Bitcoin reserve policies, and broad risk-off sentiment in financial markets. These forces created a perfect storm for leveraged long positions.

How much money was liquidated in 24 hours?

Approximately $952 million** in crypto positions were liquidated in the past 24 hours, with over **$884 million coming from long (bullish) positions. This level of liquidation often exacerbates downward price movement due to forced selling.

Could Bitcoin really fall to $70,000?

While not guaranteed, a move toward $70,000–$75,000 is within technical possibility if macro conditions worsen or institutional selling continues. However, strong support exists around $65,000–$67,000 based on historical accumulation zones.

What is the IBIT-CME basis trade?

It's a strategy where hedge funds buy shares of BlackRock’s IBIT ETF and simultaneously short Bitcoin futures on CME. They profit from the price difference (basis). When this spread narrows — often during price drops — funds may close positions, adding downward pressure on BTC.

Why are state-level Bitcoin reserve bills failing?

Proposals in states like Montana and South Dakota face opposition over fiscal responsibility concerns. Lawmakers worry about exposing public funds to volatility. Without federal leadership or clearer regulatory frameworks, state adoption remains unlikely in the near term.

Is extreme fear in crypto markets a buying opportunity?

Historically, readings below 30 on the Fear & Greed Index have often preceded rallies — especially during bull cycles. While timing is uncertain, periods of panic can present strategic entry points for long-term investors.

With technical corrections, policy delays, and profit-taking converging, Bitcoin’s path forward remains volatile. Yet beneath the noise, core fundamentals suggest this may be a temporary setback rather than a trend reversal. As always, monitoring on-chain data, institutional flows, and macro developments will be key to navigating what comes next.