Bitcoin economy is on the verge of accumulating a loss of more than US$ 300 Million wherein the losers would be those awaiting liquidation of Bitcoin’s option of US$ 1.1 Billion which is going to expire on Friday, the 10th of December, 2021.
The wounds of Bitcoin bulls haven’t healed yet which were inflicted due to the recent correction Bitcoin underwent on 4th December 2021. The correction took the price at the level of US$ 42,000 from the peak price of US$ 57,000. Resultantly, the correction caused shrinkage of the Bitcoin economy by at least 26.5%. However, it wasn’t just the Bitcoin economy that inflicted the wounds severely. Instead, apart from the economy, Bitcoin’s future contracts too had to take serious damage.
Bitcoin futures contracts are scheduled to expire or liquidate on Friday, 10th December 2021. The reduction in BTC’s value has taken away at least US$ 850 Million from the liquidation proceeds. Ironically, the burden of low liquidation proceeds impacted upon the “Fear and Greed Index”, which brought the index to its lowest. Such a low level hadn’t been seen by Bitcoin since July 2021.
It is quite absurd to compare the events that took place in July and, very recently, on 4th December 2021. Way back in July 2021, Bitcoin’s value fall to the level of US$ 30,000. Considering July’s low would mean that Bitcoin gains for the entire year have been eliminated. On the contrary, the 4th December low of US$ 42,000 would mean that Bitcoin is still holding 44% gains for the year.
Meanwhile, exchanges Bitcoin reserves too have been descending gradually and have moved into a level that hasn’t been seen since 2018. As per the data published by CryptoQuant, crypto exchanges have been in control of only 2.27 million Bitcoins. With only a small quantity of Bitcoins available for trading, investors and traders are reluctant in disposing of their Bitcoin assets. On the other hand, the reduction in selling pressure could be termed as the “bullish” indicator for Bitcoin, according to investors.
It is expected that at the expiry of Bitcoin’s future contract, the liquidation will accumulate a loss of US$ 300 Million. The loss would have been bigger if Bitcoin’s value had been US$ 42,000. However, since Bitcoin rebounded to some extent, the loss was reduced considerably. There could be at least three scenarios that can be expected at the expiry of Bitcoin’s future contract on Friday.
Firstly, if the price of Bitcoin will be in the range of US$ 47,000 to 50,000, then the liquidation loss will be around US$ 300. Secondly, if the price range will be between US$ 50,000 to 54,000, then the loss will be approximately US$ 160 Million. However, if Bitcoin rebounds back at the price of US$ 54,000 plus then, the loss will be reduced to only US$ 30 Million. For reduction of liquidation loss, it is essential that value change must come before 8:00 am UTC on the day of liquidation.